JOHANNESBURG - Troubled retailer Steinhoff International continued its roller-coaster ride on the JSE on Wednesday, surrendering some ground it made on Tuesday after reports emerged that the group was mulling a takeover interest in its businesses, which include clothing chain Pepco, to chart a way for a recovery process.
Steinhoff shares eased 2.2% to R1.76 following a 39% rise to R1.80 on Tuesday, after the group announced that it would pay a dividend on its preference shares.
Steinhoff was not immediately available for comment on the Pepco interest, despite increasing speculation that it wanted to buy the company as it looked to revive its fortunes.
Analysts have said that a formal auction of Pepco would come only after Steinhoff had agreed to a 9.4billion (R150.55bn) debt-restructuring deal with bondholders and other lenders.
Ron Klipin, a senior analyst at Cratos Capital, said there were talks of private equity interest in acquiring a stake in Steinhoff International.
“The question is, could Steinhoff Africa Retail (STAR) buy Pepco European operations, which have an outstanding track record and aimed at lower LSM market in emerging Eastern Europe?” Klipin asked.
Pepco is one of the profitable subsidiaries in Steinhoff. It has more than 1300 stores in Eastern European countries such as Poland and Romania. The group aims to have 1500 stores by the end of September.
In the unaudited results for the six months to the end of March, Pepco reported 40percent increase in revenue to 623million, up from 446m compared with last year.
The group said Pepco achieved these results despite a tough second quarter, with sales affected by adverse weather conditions across central and eastern Europe and some margin impact from inventory markdown resulting from supply chain issues earlier in the season.
In Pepkor Europe, which includes Pepco and Poundland, the group reported a 9percent increase in revenue to 1.52bn, up from 1.40bn compared with last year. It opened 137 new stores and closed 23 stores during the period. By the end of March, Pepkor Europe had 2210 stores.
Poundland, which has 871 stores, reported a 2.4% increase in like-for-like sales in a tough UK environment which declined by 2% during the six-month period.
Klipin said Pepco would be an attractive acquisition as countries such as Poland and Romania were larger entities with strong growth domestic product.
Klipin said the Pepco acquisition would require major funding as STAR’s current market cap of R58bn would be insufficient to fund with a rights issue and debt funding.
“The business model is similar to that of Pep stores in South Africa and the rest of the continent,” Klipin said. “The sale of assets by Steinhoff International is becoming urgent with 9.4bn due to be paid to offshore bondholders by the end of July.”