Stein­hoff in talks to buy PPR’s Con­forama for $1.6 bil­lion

The Pak Banker - - Company& -

PARIS: Stein­hoff In­ter­na­tional Hold­ings Ltd., Africa's largest fur­ni­ture maker, en­tered into ex­clu­sive talks to buy PPR SA's Con­forama chain for 1.2 bil­lion eu­ros ($1.59 bil­lion) in cash to strengthen its po­si­tion in Europe.

In­clud­ing as­sumed li­a­bil­i­ties, the of­fer val­ues France's sec­ond-largest fur­ni­ture re­tailer at 1.625 bil­lion eu­ros, said two peo­ple with knowl­edge of the mat­ter, who asked not to be named be­cause the dis­cus­sions are pri­vate. PPR said the of­fer's to­tal value is more than 1.5 bil­lion eu­ros.

For Stein­hoff, ac­quir­ing Con­forama would add 241 stores to the Jo­han­nes­burg­based com­pany's 951 re­tail out­lets across Europe. PPR would move a step closer to its aim of fo­cus­ing on its Gucci Group lux­ury goods unit and Puma AG sport­ing-goods di­vi­sion. The Paris-based com­pany also plans to sell the Fnac mu­sic chain and mail-or­der re­tailer Red­cats.

"We are very much in fa­vor of the deal be­cause we think it will greatly en­hance Stein­hoff's abil­ity to dis­trib­ute its goods in Europe and it will cut the costs of dis­tri­bu­tion for Con­forama," said Wayne McCur­rie, a fund man­ager at RMB As­set Man­age­ment in Jo­han­nes­burg, which holds shares in Stein­hoff.

Stein­hoff rose 1 rand, or 4.4 per­cent, to 23.60 rand in Jo­han­nes­burg trad­ing to­day, the high­est since May, 2007. PPR shares fell 2.1 eu­ros, or 1.7 per­cent, to 124.80 eu­ros in Paris.

Ex­clud­ing debt, the trans­ac­tion would value Con­forama at about 6.1 times 2009 earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion, Bloomberg cal­cu­la­tions show.

"It cer­tainly seems like a rea­son­able price and I think it's a good deal for both PPR and Stein­hoff," said Mark Hodg­son, an an­a­lyst Av­ior Re­search in Cape Town, who has a "buy" rat­ing on Stein­hoff.

The trans­ac­tion has the sup­port of more than 50 per­cent of Stein­hoff's share­hold­ers and may con­clude in the next few weeks af­ter staff rep­re­sen­ta­tives are con­sulted, the com­pa­nies said.

Stein­hoff has been work­ing to ac­quire Con­forama for four years, Chief Ex­ec­u­tive Of­fi­cer Markus Jooste said in an emailed re­sponse to ques­tions from Bloomberg News.

The pro­posed pur­chase "will al­low us to re­in­force our po­si­tion as one of Europe's lead­ing in­te­grated fur­ni­ture and house­hold-goods com­pa­nies," Jooste said in a state­ment.

Stein­hoff op­er­ates more than 50 fac­to­ries in coun­tries such as Poland, the Nether­lands, Aus­tralia and South Africa, and has more than 1,100 re­tail out­lets. It em­ploys about 41,000 peo­ple.

Con­forama ranks be­hind Ikea in France and also has stores in Switzer­land, Lux­em­bourg, Spain, Por­tu­gal, Italy and Croa­tia.

The re­tailer's earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion in­creased 32 per­cent to 83 mil­lion eu­ros in the first six months of 2010 as sales rose 6.2 per­cent. Thirdquar­ter sales gained 9.8 per­cent. PPR may ac­quire more brands to bol­ster its lux­ury di­vi­sion and sports and life­style unit af­ter sell­ing one or two of the re­tail busi­nesses, Chair­man and CEO Fran­cois-Henri Pin­ault said Oct. 18. There have been 692 ac­qui­si­tions an­nounced in the re­tail in­dus­try in the past 12 months, ac­cord­ing to Bloomberg data.

Burberry Group Plc, the U.K.'s largest lux­ury re­tailer, climbed as much as 6.6 per­cent in London trad­ing yes­ter­day on spec­u­la­tion that PPR may make a bid. "Ac­qui­si­tions in life­style are more likely than, say Burberry, which I think was an old idea," said Luca Solca, an an­a­lyst at San­ford C. Bern­stein. -Bloomberg

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