Dis-Chem in agreement to acquire 100% of Baby City from its founder
The acquisition comes when Dis-Chem has received much criticism for refusing to pay full rent to mall owners, despite still trading as an essential service under the lockdown regulations.
Dis-Chem has also locked horns with the Competition Commission over claims that it raised the price of masks, which it denied.
The group said on Friday that Michel Aronoff, who conceptualised and strategised Baby City’s direction, would continue to serve as managing director of Baby City following the closure of the transaction.
Dis-Chem said the rationale behind the acquisition was that the characteristics of the baby-product sector align with those of the pharmacy sector. “Both sectors are extremely resilient, with perpetual new entrants. The baby sector sees approximately 900000 new babies annually,” the group said.
According to Statistics SA, just more than 1 million births were registered in South Africa in 2018.
Dis-Chem chief executive Ivan Saltzman said the acquisition was a great cultural fit and had been a target of them for many years.
“The brands and businesses were built with similar philosophies, ensuring management team alignment as we take steps to unlock the value we see in the Baby City brand,” Saltzman said.
The transaction contains both a shareholder loan and a net working capital guarantee, which ensured that Baby City’s position upon closure resembles the pre-Covid-19 level, while incremental earnings accrue to Dis-Chem.
The group said the transaction remained subject to regulatory conditions, including the approval from the competition authorities.
Baby City is a specialist destination baby retailer that operates a network of 33 stores across South Africa and sells a range of branded baby products. The brand’s focus is primarily on first-time parents.
Baby City generated revenue of R855million for the 12 months to the end of February.
Dis-Chem said Baby City continued to trade well relative to the Covid-19 lockdown environment, and demonstrated both the resilient nature of the industry and the inherent brand equity of the retailer.
Aronoff said both organisations shared the same ethos and passion inherent in entrepreneurially run businesses.
“Our trajectory echoes Dis-Chem’s history and growth, and we are confident that our shared philosophy of customer-focused quality and service will translate into solid growth for Baby City as part of the Dis-Chem stable,” Aronoff said.
The Baby City retail stores will be integrated into Dis-Chem’s current supply chain and serviced by CJ Distribution after the conclusion of the transaction.
Dis-Chem shares closed 1.5percent higher at R19.66 on Friday.