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Global private investment firm Bain Capital has made a R25 billion buyout offer for South Africa's largest fashion retailer Edgars Consolidated Stores (Edcon) in the country's biggest private equity deal yet.
Edcon said the cash offer was R46 for an ordinary share and R2 for each preference share. Edcon's board has recommended that shareholders accept the offer.
Rennaissance Asset Management head of research Nothando Ndebele said it was an excellent offer.
"I can not really see a lot of people objecting to it," she said.
Edcon non-executive chairman Selwyn MacFarlane said the board saw the offer as an exceptional opportunity for shareholders to realise substantial value from their investment.
"Following a comprehensive auction among global private equity firms, and the receipt of a preliminary fair-and-reasonable opinion from PricewaterhouseCoopers, the Edcon board of directors unanimously recommended Bain Capital's bid to shareholders."
Edcon spokesman Tessa Christellis said the Edcon board and management had approached private equity players about a possible transaction.
"There was a feeling that the share was being under-valued by the market," she said.
Bain Capital managing director Steve Zide said the firm was pleased to be part of the next phase of the growth of Edcon.
"We have been greatly impressed by the world-class quality of the Edcon business, its systems and its people. Our belief in the growth potential of the South African economy is a significant factor in our investment decision," Zide said.
Edcon said the transaction would be funded with a financing package of long-term debt and equity, with Barclays and Absa Capital providing the debt financing.
Gryphon Asset Management chief investment officer Abri du Plessis said international retailers did not really have a presence in South Africa - a market still showing strong consumer demand.
"Retail is a safe sector and probably a lot less risky than other sectors in the economy," he said. - Reuters