Analysts suggest purchase price could be in the re
Analysts suggest purchase price could be in the region of R50m
Edcon acquires Topics clothing chain
January 25, 2005
By Dirk De Vynck
Cape Town - Listed clothing retailer Edgars Consolidated Stores (Edcon) has acquired the Topics clothing chain for an undisclosed amount, although analysts suggest the purchase price could be in the region of R50 million.
Mark Bower, the chief executive of group services at Edcon, said details on the purchase price could not be made public because of a confidentiality agreement between Edcon and the seller.
However, Edcon did say that Topics was bought at a discount to net asset value and that the deal was settled in cash. It also said that Topics` turnover, at more than R320 million, was less than 2.5 percent of Edcon`s and that the purchase price was immaterial to Edcon`s trading results.
Topics consists of over 125 smaller format stores averaging a little over 300m2, which Edcon said were in locations suitable for expansion. Topics also has a debtors book of about 200 000 customers.
Steve Ross, Edcon`s chief executive, said: `We are always on the lookout for sensible acquisitions that complement our offering, our debtors book and/or property portfolio.`
He said the Topics stores would be maintained in their current format as the group determined which locations might offer greater growth or profit opportunity from Edcon`s other trading formats.
But an analyst suspected that many of the Topics stores would disappear to make room for Edcon`s brands, as there was talk that the company was not doing too well.
Still, sources said that Topics was profitable and definitely not in a distressed state.
Mark Ansley, a retail analyst at African Harvest Fund Managers, said the deal did not come as too big a surprise, as there had been talk in the market of possible suitors for Topics.
Abri du Plessis, an analyst at Gryphon Asset Management, said he saw many synergies in the deal and cost cutting opportunities in areas where there was duplication.
As for possible job losses, Ross said Edcon needed the staff employed by Topics to support the trading Topics stores, while others could find a home within the greater Edcon group.
Topics was owned by Wooltru before it was sold at the end of 2001 for R15 million to a consortium led by Tuan Marais and Leonard Abel, who were directors and former owners of Ivano, an 80 percent owned subsidiary of Topics.
At that time Topics was apparently trading at an operating loss of about R28 million. Since 2001 the company has also closed about 30 weaker-performing stores.
Other recent Edcon takeovers include its acquisition of Boardmans early last year and of CNA in October 2002.
The acquisition is still awaiting approval by the competition authorities.
Edcon`s share price yesterday firmed by 3.54 percent to R293.01, while the general retailers sector appreciated by 1.99 percent.
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