Shoprite sells over 400 stores for R3 billion

South Africa’s largest retailer Shoprite will sell its furniture unit to Pepkor, as it focuses on expanding its specialist clothing, baby, outdoor, and pet stores.

The group announced on Tuesday (3 September) that it will sell the business to Pepkor for about R3 billion rand.

The purchase consideration represents around 4% of Pepkor’s market capitalisation and will be settled in cash.

Shoprite has also pulled back its main grocery business in several other countries across the continent.

“We found ourselves at a crossroads with the business’s future growth and profitability hamstrung by the requirement of a level of investment that would have resulted in us re-directing capital and project management resources away from that currently dedicated to our food retail operations,” Chief Executive Officer Pieter Engelbrecht said in an earnings statement.

For Pepkor, the continent’s biggest clothing retailer, which has struggled to scale up its business that sells beds, sofas and appliances, the purchase will help boost stores by a quarter to 1,300.

The group will be acquiring over 400 stores in South Africa, Botswana, Lesotho, Namibia, Eswatini and Zambia.

The transaction includes the Shoprite Furniture credit loan book and related insurance cell captive arrangements, as well as the OK Furniture and House & Home retail brands, in addition to inventory and certain fixed assets.

Explaining the move to buy the stores, Pepkor said that its JD Group business—recently rebranded as Pepkor Lifestyle—already operates more than 900 retail stores in South Africa, Botswana, Lesotho, Namibia and Eswatini.

“Combining Shoprite Furniture with Pepkor Lifestyle will enable key synergies and efficiencies to be unlocked within the supply chain, logistics and financial services operations through leveraging improved scale,” the group said.

Pepkor Lifestyle will expand its customer base and retail footprint while integrating Shoprite Furniture operations into its existing logistics network, led by Pepkor’s management team.

“The transaction will allow Pepkor to expand its value proposition through a complementary product mix in furniture, bedding, appliances and consumer electronics while also expanding its presence in underrepresented regions,” it said.

The Shoprite transaction is still pending approval.

In a separate transaction, Pepkor disposed of its wholly owned subsidiary, The Building Company (TBCo), to Capitalworks Private Equity for a purchase consideration of around R1.2 billion.

The South African Competition Tribunal approved the TBCo Transaction on 23 August 2024, subject to conditions which parties have accepted. The TBCo transaction will close on 30 September 2024, being the effective date.

Update: This article has been updated to clarify the approvals of the two different transactions.

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