Shoprite, South Africa’s largest grocery retailer, has agreed to sell its furniture division, including the well-known OK Furniture and House & Home brands, to discount retailer Pepkor.
The sale, confirmed on Tuesday, 3 September 2024, is valued at approximately R3.2 billion($178.2 million), representing about 4% of Pepkor’s market capitalization. As of Monday, Pepkor’s market value stood at R80.49 billion ($4.48 billion). The transaction will be settled in cash, as confirmed by Pepkor in an official statement.
Pepkor will acquire more than 400 stores currently operated by Shoprite in South Africa, Botswana, Lesotho, Namibia, Eswatini, and Zambia. However, Shoprite’s furniture operations in Angola and Mozambique will not be part of the transaction.
Along with the store network, Pepkor will also take over the Shoprite Furniture credit loan book and associated insurance arrangements, as well as inventory and specific fixed assets tied to the business.
Shoprite’s decision to sell its furniture business comes as the company seeks to reallocate resources and focus on its primary grocery retail operations. The furniture segment, which contributed R7.2 billion($400.5 million) or 3% to Shoprite’s group sales in the last full fiscal year, was deemed less important to the company’s long-term growth strategy.
“We found ourselves at a crossroads with the business’s future growth and profitability hamstrung by the requirement of a level of investment that would have resulted in us re-directing capital and project management resources away from that currently dedicated to our food retail operations,” Shoprite CEO Pieter Engelbrecht said in a statement.
Notably, besides the furniture division sale to Pepkor, Shoprite has been scaling back its grocery business in several other African countries, with the aim of optimising its operations in South Africa and key neighbouring markets.
What does this deal mean for Pepkor?
For Pepkor, which already operates a Lifestyle business unit comprising six household furniture, appliances, and consumer electronics retail brands, the acquisition represents an opportunity to expand its market presence and product portfolio.
The deal will increase firms store count by a quarter, bringing its total to approximately 1,300 stores across the region.
“The proposed transaction will allow Pepkor to expand its value proposition through a complementary product mix in furniture, bedding, appliances, and consumer electronics, while also expanding its presence in under-represented regions,” Pepkor stated.
The transaction is still pending regulatory approval.
Should the deal go through, it would position Pekor for potential growth and increased market share in the retail sector.
The transaction comes shortly after the company announced the sale of its wholly-owned subsidiary, The Building Company (TBCo), to Capitalworks Private Equity.
The sale, valued at approximately R1.2 billion($66.7 million), was approved by the South African Competition Tribunal on August 23, 2024, and is expected to close on September 30, 2024.
The company said the sale was part of its broader strategy to focus on its core retail operations, much like Shoprite’s decision to divest its furniture business.
