South African clothing retailer Edgars is exploring a sale to rival Pepkor for R2.4bn

Pepkor Holdings, the leading clothing retailer in Africa, is reportedly evaluating the acquisition of Edgars, a South African competitor. Sources close to the matter suggest that Pepkor, known for its Pep, Ackermans, and Tekkie Town chains, might offer up to 2.4 billion rand (~A$192.6 million) for Edgars. Retailability Pty Ltd., currently owns Edgars, having purchased it three years ago following a business rescue operation. However, the potential deal is not yet confirmed.

Transaction Snapshot

  • Deal Value: 2.4 billion South African rand (~A$192.6 million)
  • Deal Type: Acquisition
  • Target: Edgars (owned by Retailability)
  • Acquirer: Pepkor Holdings

Edgars, a 94-year-old brand, operates 131 stores specialising in women's clothing and cosmetics. Pepkor's interest in Edgars aligns with its strategy to expand in these specific retail categories. This information was disclosed by unnamed sources due to the private nature of the discussions.

Pieter Erasmus, CEO of Pepkor, indicated the company's focus on organic growth and interest in expanding adult clothing lines, possibly through acquisitions, during an interview on 29 November. He emphasised Pepkor's strong financial position and its low market share in adult-wear as a significant growth opportunity.

Pepkor has not officially commented on the potential acquisition of Edgars. Retailability CEO Norman Drieselmann also addressed the matter, stating that while open to opportunities, there is currently no deal to sell Retailability or Edgars.

The context of this potential acquisition includes The Foschini Group's successful revitalisation of Jet, another local discount clothing chain, which is intensifying competition in the market. TFG acquired Jet in 2020 from Edcon Holdings, which previously owned both Jet and Edgars.

Since acquiring Edgars, Retailability, backed by Johannesburg-based private equity firm Metier, has made strategic changes, including reducing nonperforming store space and renegotiating rents. The turnaround of Edgars is reportedly in its final phase, according to Drieselmann.

Additionally, Pepkor is expanding in Brazil, having acquired Grupo Avenida last year for under 3.2 billion rand. This marked Pepkor's first venture into South America, and the company plans to accelerate store openings in Brazil.

Pepkor's shares have declined by 5.1% this year, impacted by suboptimal fashion selections at its primary Ackermans unit. This downturn has positioned Pepkor as the least performing clothing retailer on the FTSE/JSE Retailers Index.

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