Pepkor, Africa\u2019s largest clothing retailer, is exploring a potential takeover of South African rival Edgars, according to people familiar with the matter.<\/p>\n\n\n\n
The owner of chains including Pep, Ackermans and Tekkie Town is considering paying as much as R2.4 billion for the 94-year-old brand, which three years ago was bought out of business rescue by retail holding company Retailability, the people said.<\/p>\n\n\n\n
Talks could yet fall apart, and another buyer may emerge, they said. <\/p>\n\n\n\n
A deal could provide Pepkor with an additional 131 stores with a focus on women\u2019s clothing and cosmetics, areas in which Pepkor is looking to expand, according to the people who asked not to be identified because the information is private. <\/p>\n\n\n\n
Pepkor Chief Executive Officer Pieter Erasmus last week said that while the discount retailer is \u201cfocused on organic growth,\u201d it also wants to sell more adult clothing and would consider doing that through an acquisition \u201cat the right price.\u201d<\/p>\n\n\n\n
\u201cWe\u2019re not constrained from a capital point of view. Our gearing is well under control,\u201d Erasmus said in a 29 November interview.<\/p>\n\n\n\n
\u201cOur biggest opportunity is where we have a very low market share, which is in adult wear.\u201d<\/p>\n\n\n\n
Pepkor declined to comment on the possible purchase of Edgars. <\/p>\n\n\n\n
\u201cPrivate equity is always open to opportunities, but there is no deal to sell Retailability or Edgars at present,\u201d said Retailability CEO Norman Drieselmann in response to questions. <\/p>\n\n\n\n
The talks come as The Foschini Group\u2019s turnaround of local rival discount clothing chain Jet is increasing competition for the lower end of the market.<\/p>\n\n\n\n
TFG bought Jet in 2020 from the administrators in charge of salvaging Edcon Holdings Ltd. from bankruptcy proceedings. Edcon owned both Jet and the Edgars chains. <\/p>\n\n\n\n
Since buying Edgars, Retailability has reduced nonperforming store space and negotiated more favourable rents.<\/p>\n\n\n\n
The company, which is backed by Johannesburg-based private equity firm Metier, also owns brands such as Legit, Beaver Canoe and Boardmans. <\/p>\n\n\n\n
Edgars\u2019 turnaround is continuing, with the department stores \u201cin the final phase of the recovery program,\u201d said Drieselmann.<\/p>\n\n\n\n
Pepkor is also expanding in Brazil. The Cape Town-based company bought Grupo Avenida SA for less than R3.2 billion last year \u2014 its first move into South America \u2014 and is now increasing investments there as it repositions that unit toward the discount segment. Erasmus said it plans to open 50 Avenida stores a year, double its initially planned rate.<\/p>\n\n\n\n
Shares of Pepkor have dropped 5.1% this year as it\u2019s struggled with poor fashion choices at its flagship\u00a0Ackermans\u00a0unit, making it the worst-performing clothing retailer on the FTSE\/JSE Retailers Index.\u00a0<\/p>\n\n\n\n