Tar­get Cor­po­ra­tion seeks ex­po­sure to Africa through the ac­qui­si­tion of Clicks Group Limited

Finweek English Edition - - COMPANIES & INVESTMENTS -

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.

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