Shoprite, South Africa’s premier retail giant, is set to divest its furniture division to Pepkor, channeling its focus on the expansion of its specialized segments, including clothing, baby products, outdoor equipment, and pet supplies. On Tuesday, September 3, the group disclosed its plan to offload the furniture business to Pepkor for an estimated R3 billion. This sum equates to roughly 4% of Pepkor’s market value and will be paid in cash.
In a strategic shift, Shoprite has scaled back its primary grocery operations in various African nations. Shoprite’s CEO, Pieter Engelbrecht, explained the decision in an earnings report, stating that the furniture unit’s growth and profitability were constrained by the need for substantial investment. Such investment would divert capital and project management resources from the company’s core food retail operations.
For Pepkor, Africa’s leading apparel retailer facing challenges in expanding its homeware division, this acquisition is set to enlarge its store count by 25%, bringing the total to 1,300 outlets. The deal encompasses over 400 stores located in South Africa, Botswana, Lesotho, Namibia, Eswatini, and Zambia. It includes the Shoprite Furniture credit loan book, insurance cell captive arrangements, and the retail brands OK Furniture and House & Home, along with inventory and select fixed assets.
Pepkor’s rationale for the acquisition is to merge Shoprite Furniture with its Pepkor Lifestyle arm—formerly known as JD Group—which currently operates in excess of 900 retail stores across Southern Africa. The merger is anticipated to unlock synergies and efficiencies within the supply chain, logistics, and financial services by leveraging the enhanced scale of operations.
Pepkor Lifestyle is poised to broaden its customer base and retail presence, integrating Shoprite Furniture into its existing logistics framework under Pepkor’s management. The acquisition aims to augment Pepkor’s value proposition by offering a diverse range of products in furniture, bedding, appliances, and consumer electronics, while also increasing its market penetration in regions where it is currently underrepresented.
While the Shoprite deal awaits regulatory approval, Pepkor has also finalized the sale of its wholly-owned subsidiary, The Building Company (TBCo), to Capitalworks Private Equity for R1.2 billion. The South African Competition Tribunal sanctioned the TBCo transaction on August 23, 2024, with agreed-upon conditions. The TBCo deal is set to conclude on September 30, 2024.
