SPAR could save the day for major retailer in business rescue

South African retailer Spar Group is considering an offer to acquire cash-strapped West Pack Lifestyle, according to people with knowledge of the matter. 

The nation’s second-largest grocer by revenue previously said it plans to expand beyond the food segment and win more market share in South Africa. West Pack, which sells homeware, has gone into business rescue — a local form of bankruptcy protection. 

The group also sits on a large debt pile that a purchaser would have to take on, said the people, asking not to be identified because the information is still private.

“While we are always reviewing or exploring ways to increase our offerings and expand our business, discussions such as this would be confidential until finalized, and Spar is not in discussions with West Pack Lifestyle currently,” Spar said in a response to questions.

Matuson & Associates, the administrators handling the rescue process, received a number of binding offers for West Pack last week, a spokesperson said. They will now evaluate these, the spokesperson said, declining to provide information on the bidders because of confidentiality agreements.

The administrator plans to provide an overview of the competing bids to the creditors’ committee and other stakeholders in the second week of September and will publish the proposed business-rescue plan on Sept. 23. Creditors will need to vote on the plan, the spokesperson said.

Other parties who have made the bids include private equity firms, and some rivals to Spar, the people said. 

Besides its grocery franchises, Spar also owns a chain of building-materials store and it plans to expand into pet shops and two other categories, Chief Executive Officer Angelo Swartz said in an interview in June. 

West Pack is the holding company of Petzone, which is also in business-rescue proceedings, although they are separate legal entities.

Companies including Spar are banking on the nation’s new coalition administration known as the government of national unity to prioritize economic growth, key to adding jobs and increasing disposable income.

The new administration has agreed to make economic growth its top priority as it seeks to reduce a 33.5% unemployment rate. Electricity shortages, logistics snarl-ups and red tape have hamstrung economic growth, with gross domestic product expanding by an average of less than 1% a year over the past decade.  

The Durban-based company expects its non-food business to account for 30% of sales in five years, Swartz said. Spar’s shares have climbed 8.4% since the start of the year. 

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