Target Corporation seeks exposure to Africa through the acquisition of Clicks Group Limited
THE PROPOSED DEAL would be for 51% of the issued share capital in Clicks to be acquired at R67.26 ($ 6.73 at 27/9) per share: a premium of 25% based on their closing price on 27 September 2013 of R53.81 ($ 5.3892 at 27/9).
RATIONALE FOR THE DEAL
The acquisition will give Target exposure to Southern Africa and Africa in the future.
The acquisition will give Clicks greater bargaining power with its international suppliers and allow for improved supply-chain management.
Target will make new products available to Clicks to improve its offerings in the health and beauty retail markets and will make all of its exclusive brands available to Clicks and Musica Stores.
Target will give Clicks access to lower US borrowing rates to aid its improvement of its distribution centres and networks, and aid its expansion into new markets, as and when this is deemed to be appropriate.
Target will offer consulting services to Clicks in terms of the design of new and existing stores and make available its experts for Clicks’s planned Customer Service Excellence Programme.
Clicks and The Body Shop products will be made available for sale online in the US via Target’s recently acquired subsidiary DermStore.com, and the UPD export business will be utilised by Target’s pharmacy and clinics.
Target will ensure Clicks pharmacies have the latest pharmaceutical drugs available to further improve their offering in the South African market.
THE FINWEEK VIEW
The decision to incorporate foreign players into the project this year was an i nteresting one and cer t ai nly opened up the field. While Finweek does not buy the thinking behind the Facebook/Investec deal, we think that a retail move like this is interesting.
Recently i t was announced that Coronation has been upping its stake from 7.22% to 16.52% of the ordinary shares in issue. The Public Investment Corporation also announced recently that its holding increased from 11.85% to 15.24%.
Neither company has rock- solid brands, so the deal doesn’t feel like it comes with an ‘ego- premium’ and we wouldn’t be surprised i f Clicks came into play at some point down the line.