The agreement that includeed an issue of 839 million in shares and 15 billion rand in cash is subject to regulatory and shareholder approval.
The combined entity will comprise more than 6,000 stores globally, and sales of more than 155 billion rand.
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The agreement will see growth trajectory of the combined group being greatly enhanced by the geographical footprint overlap and the complementary footprint largely focused on the fast growing value and discount market segment.
[DATA SHF:Steinhoff International Holdings Limited]confirmed that the proposed acquisition is expected to be concluded by the end of the first quarter of 2015, pending various regulatory approvals and will not delay plans to list the company on the European stock exchange.
“Pepkor and its management team are a compelling strategic fit for us, its current product, customer and global footprint are all well aligned to that of Steinhoff, thereby bolstering Steinhoff’s existing retail,” said Markus Jooste, group chief executive of Steinhoff.
Jooste added that Steinhoff will be able to offer a wider range of discount products for the family, thereby re-enforcing the ‘one stop discount destination store’ offering and enhancing customer service.
“There’s also a great added potential for optimisation of existing trading formats of the Steinhoff and Pepkor networks – particularly in southern Africa – in addition to the possible conversion of current sub-optimal stores into positive contributors to the profitability benefits of the combined business.”
The combined business offers expansion opportunities for the successful Pepkor trading formats within the existing store and property network of Steinhoff thereby increasing trading densities for Steinhoff’s existing businesses and an improved recovery of the existing fixed cost base.
Pieter Erasmus, chief executive of Pepkor said the combined group will benefit from cost synergies arising from the amalgamation of logistics, warehousing and supply chain operations.
“The new group’s combined supply chain and logistics functions will gain significant scale and with a substantial overlap in Eastern Europe, Australia and Africa, which is expected to create increased buying power and economies of scale that will – in time – deliver a material improvement in profitability,” added Erasmus.
Additional benefits of the acquisition include optimisation of Pepkor and Steinhoff’s sourcing supply chains from the Far East and logistics infrastructure.
Pepkor focuses on the higher growth discount and value market segments, and operates in 15 countries on three continents through various trading formats.
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Steinhoff aims to generate value for the business through profitable expansion of the Pepco business model within the existing discount formats throughout Europe, particularly Germany and Eastern Europe.
This will diversify the group’s product mix with the addition of faster moving, less cyclical products which in turn will increase per square metre sales densities.
Steinhoff said shareholders representing over 50 per cent of the group’s share capital have indicated support for the transaction that would result in the integrated retailer’s global business revenues increasing with approximately 39 billion rand to 156 billion rand.