Johannesburg - Steinhoff International’s acquisition of a stake in British retailer Poundland was good for the South African firm’s credit profile, ratings agency Moody’s said yesterday.
The owner of Conforama, Europe’s second largest furniture group, said last week that it had bought 23 percent of Poundland and said it might make a cash offer for the rest of the no-frills retailer.
An investment in Poundland would give Steinhoff an annual return of roughly 10 percent, Moody’s said, adding that this would be better than what it could get from current low and negative interest alternatives.
Steinhoff, which has been hunting for new assets in Europe since listing in Frankfurt last year, has about e3.7 billion (R63.1bn) in cash to fund opportunistic acquisitions.
Moody’s said using Poundland’s market value, Steinhoff’s cash would be “more than sufficient” to fund the e556.2 million needed to buy the rest of the British retailer.
“Given Steinhoff’s past approach to acquisitions, we expect any offer would have a conservative valuation, and that in a bidding war, Steinhoff would walk away from expensive valuations,” the ratings agency said.
REUTERS