Joffe upbeat on Rage acquisition

• Long4Life chief backs acquisition of footwear and clothing retailer but says deal is subject to proper due diligence

Brian Joffe’s investment company Long 4 Life is not being gung-ho about its latest transaction — the purchase of footwear and clothing retailer Rage. “This is a high-growth company and it has huge potential, but I want to reiterate, it’s subject to us doing a proper due diligence, and that work is in progress, so for the next two months that’s what we’ll be concentrating on,” Joffe said.

Brian Joffe’s investment firm Long4Life is not being gung-ho about its latest potential transaction: the purchase of footwear and clothing retailer Rage.

“This is a high-growth company and it has huge potential, but I want to reiterate, it’s subject to us doing a proper due diligence and that work is in progress, so for the next two months that’s what we will be concentrating on,” Joffe told Business Day.

His comments came as some analysts said the R3.9bn price tag might be too high.

“In our view, Rage is reasonably priced based on the information that we’ve currently got. I’m not saying it’s a bargain but it’s also not hugely overpriced. It’s a very unique asset,” the Bidvest founder said.

Rage — whose 555 existing stores target middle- and lowerincome earners — operates in a fast-growing segment of the market and provides Long4Life with exposure to new types of customers.

Scale was essential in the market Rage operated in, “and it’s not every day that you can find a company in the market that makes the kind of numbers that this private company does”.

Long4Life said in a statement Rage could roll out more stores and products in SA and other parts of Africa. There would also be cross-selling opportunities.

The group would fund the deal by issuing R1.5bn worth of new shares — giving Rage’s management a 22.8% stake in Long4Life — and with R2.4bn in cash. The cash portion would comprise internal funds and bank debt of about R1.5bn.

Just One Lap founder Simon Brown said the deal “looks very expensive”, while synergies between Rage and other companies in the group were not immediately obvious. Brown, a Long4Life shareholder, was “not impressed” with the deal as investors would be significantly diluted by the new shares.

The purchase price is more than 10 times Rage’s earnings before interest, taxes, depreciation and amortisation (ebitda).

Meanwhile, although the deal would use up all of Long4Life’s cash reserves, Joffe said the company planned to continue making investments.

Once the deal was completed, “we’d still be at about eight or nine times ebitda cover, which is acceptable and a better ratio than many in the market today. So we’re not looking to slow down and I think we want to continue down this path — we’ll be aggressive and we want to scale up the company reasonably quickly,” Joffe said.

Long4Life previously acquired Holdsport’s Sportsmans Warehouse, Outdoor Warehouse and Performance Brands, as well as Sorbet, Inhle Beverages and Chill Beverages.

IT’S NOT EVERY DAY THAT YOU CAN FIND A COMPANY IN THE MARKET THAT MAKES THE KIND OF NUMBERS THAT THIS PRIVATE COMPANY DOES