Steinhoff bid for JD Group points to ills

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Johannesburg - JD Group’s rights offer last month wasn’t enough to cure the furniture retailer’s ills, leading Steinhoff International to bid for shares to shore up the company, according to Jean Pierre Verster, a fund manager at 36ONE Asset Management.

Steinhoff, a furniture manufacturer, yesterday offered 1 share for every 1.9 JD Group share as it seeks to increase its stake to 98 percent from 56.8 percent.

The offer is equivalent to 27.77 rand a share, a 26 percent premium to JD Group’s closing price the previous day.

JD Group said February 11 it would sell shares worth as much as 1.5 billion rand ($139.7 million) as it raised bad debt provisions.

The rights issue was fully underwritten by Steinhoff.

“Steinhoff must have also considered the rights offer to be insufficient and a script deal meant it didn’t have to find cash,” said Verster, who helps oversee the equivalent of more than $1.1 billion at 36ONE in Johannesburg.

JD Group had a net loss of 138 million rand for the six months through December.

South African retailers have been struggling amid high unemployment and slower economic growth.

South Africa’s Reserve Bank raised borrowing costs in January for the first time since 2008, increasing pressure on retailers such as JD Group that offer credit to shoppers.

JD Group slid 1.1 percent to 27.90 rand at the close of trading today in Johannesburg, giving the company a market value of 6.4 billion rand.

The stock jumped 28 percent yesterday, the biggest gain on record according to data compiled by Bloomberg.

 

‘Caught Short’

 

“The outlook for JD Group hasn’t been great and I think there are investors who were caught short on the stock,” Henre Herselman, a derivatives trader at Nedbank Private Wealth in Johannesburg, said today.

Steinhoff said its purchase will help support JD Group, which is facing “many challenges in the furniture retail and consumer finance business segments” and which will “take some time and additional capital to overcome.”

Steinhoff’s shares fell 2.7 percent to 52 rand, paring its gain this year to 15 percent and giving the manufacturer a market value of 107.9 billion rand. - Bloomberg News



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