Another company in business rescue saved in South Africa

West Pack Lifestyle is the latest South African company to have survived business rescue proceedings.

The popular retailer voluntarily initiated business rescue proceedings in May, as it was financially distressed and unable to pay its debts when they became due over the following six months.

The business rescue proceedings affected several companies under West Pack, including West Pack Lifestyle, West Pack Lifestyle Distribution Centre, West Pack Franchise, Petzone, Petzone Franchise, Café Estreito, Café Estreito Franchise, and Beija Flor Investments.

The group said it had been in financial trouble as its accelerated growth path strained its cash flow.

It added that the high capital cost of opening stores and the increased inventory mix hurt the company’s cash flow and ability to repay debt. The inventory increased due to incorrect stocks and product mix.

The company added that its working capital constraints prevented it from buying the right products to fix its product mix.

The overall economic environment in South Africa, characterised by low growth and load shedding, further strained the business.

However, the company has now been rescued and has avoided liquidation proceedings.

As reported by the Sunday Times, West Pack found a private buyer who purchased its businesses and assets.

According to Fluxmans Attorneys director Craig Blumenthal, 35 buyers were approached, 18 of whom expressed interest. One of the interested buyers was reportedly SPAR.

The final offer was accepted in October, saving over 1,100 jobs, 30 corporate stores, 40 franchise stores and the overall West Pack brand.

Live or die

West Pack is not the only South African business to have survived business rescue proceedings; Autozone was also saved.

AutoZone is the largest privately owned and leading distributor of auto parts, spares, and car accessories in South Africa, with approximately 169 retail stores and 7 QSV stores.

The group entered business rescue proceedings in July 2024 amid debt servicing struggles.

However, JSE-listed investment group Metair announced its plan to acquire AutoZone for R290 million.

That said, not all companies survive business rescue proceedings.

This was the case for Solar company Hohm Energy and JSE-listed Ellies Holdings, which entered liquidation after their respective business rescue proceedings failed to save the companies.

Retailer Drip Footwear also entered liquidation in September after the company struggled to pay R20 million for advertising services.

Sports retailer Frame Leisure Trading—which operates The Cross Trainer— also entered liquidation proceedings in October as the business rescue practitioners could not gather the support of suppliers and landlords.

The COVID-19 pandemic, July 2021 unrest, and heavy rental escalations hit the company. It also could not keep up with its debt repayments amid a drop in consumer spending and increased operational costs.

In October, the business rescue practitioners submitted an urgent application to the Pretoria High Court to change the business rescue proceedings to liquidation proceedings. 

This came despite a consortium, Connecting Creativity, offering R80 million to take control of the company ahead of the urgent application.

The business rescue practitioners spoke to all the creditors for informal input regarding pursuing a possible transaction with Connecting Creativity, but the overwhelming response was negative.

Read: One of Pretoria’s biggest malls is in trouble – and making changes to turn things around