JOHANNESBURG - Old Mutual Private Equity (OMPE) yesterday announced that it had backed footwear retailer Footgear to acquire Edgars Active and High Key chain stores which are divisions of the Edcon Group.
OMPE investment principal Chumani Kula said the acquisition would create one of South Africa’s biggest branded sports and casual wear businesses.
“Footgear’s acquisition of Edgars Active and High Key will significantly enhance the retailer's scale and footprint across southern Africa, effectively tripling the existing store base and (putting it) on track to reaching a network of 200 stores,” Kula said.
Edgars Active and High Key and Footgear are expected to employ more than 1000 people across its stores after the acquisition.
Footgear chief executive Neil Stephens said the acquisition was a vote of confidence in the company's business model and the markets in which it operated.
“Through this acquisition we are able to undertake the next steps in our expansion plans, supported by an enabling partnership with a market-leading private equity firm like OMPE,” Stephens said.
OMPE said the transaction would, however, remain subject to conditions precedent, including regulatory approvals.
It comes as the South African economy is in the midst of the most prolonged downturn since 1945. The retail sector is feeling the pinch as households grapple with pressure from higher taxes, the increasing petrol price, unemployment, high debt levels and low confidence levels.
Edcon was rescued last year after the refinancing of its R2.7 billion debt after a deal with the Public Investment Corporation, landlords and lenders.
The 89-year-old South African clothing retailer whose brands include Edgars, CNA, and Jet, received the lifeline to change its fortunes.
The rescue programme was expected to see landlords receiving equity in exchange for little or no rentals while the PIC pumped R1.2bn from the Unemployment Insurance Fund into the ailing company.
Earlier this month the PIC said it had followed the necessary procedures before investing in the struggling retailer.
It confirmed that binding agreements had been concluded among Edcon’s existing secured lenders, the PIC on behalf of the UIF and participating landlords, which would result in the implementation of a recapitalisation programme for Edcon.
The PIC said the UIF’s Socially Responsible Investment mandate allowed it to invest in projects that create and sustain jobs.
“The result of this is that the UIF is now one of the shareholders in Edcon. Had there been no intervention by both the UIF and other stakeholders, jobs would have been lost in Edcon and companies that service Edcon. In the final analysis, the UIF would have to bear the burden of having to pay unemployment insurance claims,” the PIC said.
It said the UIF’s investment was just one component of interventions by multiple stakeholders aimed at preventing the loss of over 140000 jobs across the value chain.
“Other interventions included the removal of all interest-bearing debt in Edcon,” it said.