Mr Price has concluded an agreement to acquire high performing value retailer, Power Fashion, which currently has 170 stores across Southern Africa.
Reuters analysts peg the acquisition value at around R1.6 billion.
Power Fashion was founded in the 1950s and is a high growth, family-owned apparel retailer based in Durban, South Africa. It is value-focused and cash-based, servicing low to middle-income households.
It offers merchandise for the family, retailing largely apparel merchandise but also offering cellular products, basic household items, value cosmetics, electricity and other opportunistic products.
“Mr Price and Power Fashion share a similar set of values which makes this acquisition a great fit,” said Mr Price chief executive, Mark Blair
“Power Fashion was built on a similar entrepreneurial mindset to Mr Price and also offers exceptional value to its customers. We both have high-performance cultures and are equally focused on strategic growth.
“Our sufficiently differentiated business models and target customers will enable strong positioning in both the deep-value and fashion- value segments of the market. We are pleased that we will provide immediate returns to our shareholders, as well as continue to deliver on our respective promises to our customers.”
In Power Fashion, Blair said that the group will acquire a business that meets each of these closely researched criteria:
- Value focused business that predominantly trades in cash and is aligned to the group’s core capabilities;
- Fits within the group’s capital allocation strategy and is bolt-on in nature (the size of the transaction is approximately 4% of market capitalisation);
- High performing business with a strong track record, eliminating the need for any turnaround strategy and avoiding the associated management distraction and integration costs;
- An existing business of attractive scale which is available at a reasonable valuation. Immediately earnings accretive and not dependant on synergies;
- Opportunity for significant future growth in footprint and categories;
- Low risk as opposed to acquiring an unknown territory with additional foreign exchange risk;
- Strong management and skilled team to prevent distraction and ensure continuity.