Truworths Starts Talks to Buy Footwear Chain Office Retail

Truworths International Ltd. started talks to buy Office Retail Group Ltd. in the latest international offensive by a South African retailer.
A purchase of the U.K. fashion footwear chain from owner Silverfleet Capital would add to a list of overseas takeovers by South African companies, including this year’s $1.2 billion acquisition of British fashion retailer New Look by Brait SE. No binding offer for the 150-store Office chain has been made, Cape Town-based Truworths said in a statement Monday.
South African shopping chains have been struggling to grow sales at home as unemployment of more than 26 percent, power shortages and rising inflation stifles consumer spending. Those expanding abroad are benefiting from diversifying their sources of revenue beyond the rand, which has weakened 15 percent against the dollar this year.
Last year, Woolworths Holdings Ltd. bought Australian chain David Jones Ltd. for about $2 billion. In January, The Foschini Group Ltd. agreed to buy U.K. clothing chain Phase Eight for $212 million. Truworths, which has acquired two South African children’s clothing companies this year, had cash and cash equivalents of 1.5 billion rand ($111 million) as of June 28.
“It looks like it may be an expensive deal at a peak exchange rate, so the timing doesn’t appear as attractive as their peers,” said Kyle Rollinson, an analyst at Avior Capital Markets in Johannesburg. “The South African business could still face pressure for the next 18 months and the cash Truworths has was a buffer for the weak local environment.”
Truworths approached Office’s management to discuss the 300 million-pound ($464 million) bid, the London-based Sunday Times reported on Sept. 13, without saying where it got the information. Retail Office offers mens, womens and sports footwear at the mid-level price range, Truworths said.
The shares climbed as much as 5.3 percent and traded 2.1 percent higher at 88.04 rand as of 3:26 p.m. in Johannesburg.
Truworths is in the process of changing leadership, with Chief Executive Officer Michael Mark leaving after more than 23 years at the company. He will be succeeded by Jean-Christophe Garbino, formerly of Kiabi Europe SAS. Mark, at the request of the board, is working on a month to month basis “until the transition period has been suitably completed,” Truworths said Aug. 20. 


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