SPAR coughs up R2.7 billion to exit Europe business

SPAR South Africa is selling its Polish business for R185 million as part of its turnaround plan but will need to pay R2.7 billion to recapitalise the business.

The group is selling the business to local Polish retailer Specjal.

The deal removes the loss-making business from the balance sheet and allows SPAR to focus resources on its core business in South Africa and focus on new growth opportunities.

“This also gives clarity to our dedicated employees in Poland, who now have the potential to expand the business under the ownership of Specjal, a company with the requisite resources, scale, and capacity to take these assets to the next level. This is a significant milestone for the Group,” said SPAR Group CEO Angelo Swartz.

SPAR’s Polish assets contain 200 retail stores, three distribution centres and 1 production facility.

“We are pleased to have been able to structure this sale in the agreed timeframe and are ready to take our own business to the next level by focusing on our Southern African strengths as the heart of our business,” said Swartz.

Although SPAR operates in 11 countries, its core South African business accounts for about 60% of group sales.

“This sale brings certainty for shareholders from a funding perspective. It creates an opportunity for SPAR in Poland and our people employed there, as the purchaser is a well-known retailer and wholesaler with a strong track record,” said Swartz.

“Specjal wants to scale the SPAR assets in Poland and has the resources to do so.”

Although the sale of SPAR Poland is for 40 million Polish zloty (R185 million), SPAR South Africa will have to recapitalise the business, which is estimated to cost PLN 586 446 288 (R2.7 billion).

The majority of the R2.7 billion will be achieved by SAPR settling the business’s funding debt.

The agreement is still subject to final regulatory approvals, and the recapitalisation could be increased or decreased, depending on the circumstances, to obtain a net asset value for the SPAR Poland Group equal to PLN0 at the effective date.

“Our journey into Poland is coming to an end. However, this deal further solidifies our renewed strategic intent. Our continued focus is on harnessing our strengths, driving efficiencies, profitability and excellence,” said Swartz.

Looking at other opportunities

Although the South African retailer is selling its Polish business, Bloomberg reported that the group could be considering an offer to acquire cash-strapped West Pack Lifestyle.

West Pack entered business rescue in June, with the company unable to pay its debts as they became due over the following six months. It said that its accelerated growth constrained cash flows.

SPAR, the second-largest grocer by revenue, plans to expand beyond the food segment and win more market share in South Africa. One strategy could be to acquire West Pack.

People with knowledge of the matter said that the purchaser would have to take on West Pack’s large debt pile.

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

Matuson & Associates, the administrators handling West Pack’s rescue process, received several binding offers for West Pack and is expected to provide further details later this month.

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