JOHANNESBURG (Reuters) – The Foschini Group (TFG) (TFGJ.J) is set to buy 371 stores and selected assets of Jet for 480 million rand ($28.7 million) from Edcon’s administrators, it said on Monday, allowing the South African retailer to expand into the budget apparel market.
Edcon, which also owns 91-year-old department store chain Edgars, applied for bankruptcy protection in April as it seeks to salvage parts of a group that has featured on South African shopping streets for nearly a century but failed to forge an effective e-commerce strategy and compete with international fashion chains such as Sweden’s H&M (HMb.ST) and Spain’s Zara (ITX.MC).
TFG, which owns 29 retail brands that trade in fashion, jewellery, accessories, sporting apparel, cellular, homeware and furniture, said that Edcon’s administrators have accepted the terms of its cash conditional offer.
“This acquisition also allows TFG to establish a value retail pillar … that would be costly and difficult to replicate organically,” TFG said in its statement.
The proposed deal includes acquisition of the Jet brand, a minimum of 371 commercially viable stores, a distribution centre in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini.
TFG will also buy the Jet Club membership programme and all existing stock holdings with a minimum stock value of no less than 800 million rand, it said.
Shares in TFG closed 9.09% firmer at 67.83 rand.
Gryphon Asset Management portfolio manager Casparus Treurnicht said Jet was a good fit for TFG. “TFG is underrepresented in the value segment and this gives them instant access to a well-known brand with good representation in South Africa,”
Investment analysts Christopher Gilmour said: “This is a great deal at a great price, especially seeing how TFG also gets R800 million of stock with it as well.”
On July 7, Edcon’s administrators announced the signing of a “heads of agreement” to sell parts of Edgars to private equity-backed Retailability Ltd.
Additional reporting by Tanishaa Nadkar in Bengaluru; Editing by David Goodman and Jane Merriman