October 24, 2003

By Vera von Lieres

Cape Town - Pepkor yesterday detailed a R2.1 billion offer by a private company, underwritten by Brait and Old Mutual, to acquire all the shares in the mass-market clothing retailer at R10 a share.

The counter surged to a new 12-month high on the news, gaining 15.3 percent by the end of trade to close at R9.80.

Pepkor owns and operates Pep stores, Ackermans and Best & Less in Australia.

Chairman Christo Wiese said the offer, if successful, would result in five parties becoming the new owners of the 38-year-old Cape-based business.

Senior management would have the right to a stake of up to 10 percent in the bidding company, Newco.

Other major shareholders would include an as yet unnamed black economic empowerment partner, the private equity firm Brait, life assurer Old Mutual and Wiese himself, who now has a direct stake of about 23 percent in Pepkor but voting rights for 43 percent.

Should the offer get the green light from shareholders, Pepkor would be delisted from the JSE Securities Exchange.

Wiese said the empowerment aspect of the transaction was important as Pepkor had been looking for such a deal for a long time.

"The transaction will be structured to facilitate the introduction of a black economic empowerment partner at a meaningful level, which is an important strategic objective of Pepkor."  

Another key aspect was the fact that Brait had access to substantial offshore funds which would be beneficial to Pepkor if the retailer opted to speed up growth outside Africa.

The group is planning rapid expansion at its retail chain Best & Less in Australia. A short while ago it acquired a 49 percent stake in UK retail chain Your More Store, as well as a similar interest in a retail operation in Poland.

Pepkor shareholders would be offered R10 a share but could also exchange their Pepkor shares for shares in Newco. The ratio would be 60.9 shares in the bidding company, issued at R1 each, for every 100 Pepkor shares held.

Newco said its offer to shareholders of R10 a share came at an attractive premium.

The weighted average price a share in the 30 days preceding the publication of the first cautionary announcement was R6.34.

Wiese said Pepkor shares historically had been undervalued, despite the fact that the group had delivered sound results and the retail sector as a whole had been rerated.

A shareholders' meeting to vote on the offer is expected to be held early in December.