Shoprite takes R3 billion leap forward

The Competition Commission has recommended that the Competition Tribunal approve the proposed sale of retailer Shoprite’s furniture business to Pepkor—with conditions.

Shoprite announced the proposed sale in September 2024, whereby Pepkor would acquire its furniture business for about R3 billion.

At the time, the purchase consideration represented around 4% of Pepkor’s market capitalisation and would be settled in cash.

Through the deal, Pepkor, the continent’s biggest clothing retailer, would scale up its bed, sofa, and appliance business and boost its store coverage by a quarter to 1,300.

If given final approval, Pepkor 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.

The primary target firms are the furniture segment of Shoprite Checkers and the furniture segment of OK Bazaars Venda.

The furniture segments of Shoprite Checkers and OK Venda are collectively referred to as Shoprite Furniture.

Shoprite Furniture provides homeware, furniture, electrical appliances, insurance products, and financial services to customers from a range of income groups in South Africa and other parts of Africa.

The commission said it is of the view that the proposed transaction is unlikely to substantially lessen or prevent competition in any market.

However, to address public interest concerns, the approval is conditional on the merger parties not retrenching any employees as a result of the merger.

In addition, the merged entity has agreed to maintain or increase procurement from local furniture suppliers, it said.

Why Pepkor wants a bite of Shoprite

Explaining its rationale for the deal, Pepkor said in 2024 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 the group to boost its supply chain, logistics, and financial services operations at scale.

Pepkor said its Lifestyle brand will instantly 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.

For Shoprite, the move reflects a streamlining of its business to focus on its core strengths in groceries, while expanding its specialist clothing, baby, outdoor, and pet stores.

The group noted this past week that its pet store brand, Petshop Science, is showing strong growth potential.

South Africans have over 22 million pets and spend an estimated R8 billion annually on them.

In its interim period ending December 2024, Shoprite noted that Petshop Science increased sales by 56.9%.

During the same period, Petshop Science opened in 42 new locations, taking it to 135 stores across all nine provinces.

“We saw a gap in the market to democratise pet care by making premium pet food and other veterinary-approved essentials available at supermarket prices,” said Willem Hunlun, Chief Operating Officer at the Group.