To view the PDF file, sign up for a MySharenet subscription.

TRUWORTHS INTERNATIONAL LIMITED - Acquisition of Office withdrawal of cautionary announcement

Release Date: 30/11/2015 09:00
Code(s): TRU     PDF:  
Wrap Text
Acquisition of Office withdrawal of cautionary announcement

Truworths International Limited
(Incorporated in the Republic of South Africa)
(Registration number 1944/017491/06)
JSE Code: TRU
NSX Code: TRW
ISIN: ZAE000028296
(“Truworths” or “the Company”)


ACQUISITION OF OFFICE
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

1. Introduction

Truworths is pleased to announce that it has entered into an agreement to acquire, via
its United Kingdom (“UK)” resident and managed subsidiary Shoo 615 Ltd, a majority
interest in the Office Retail Group Limited (“Office” or “the Business”) from Silverfleet
Capital and existing Office management (the “Acquisition”). In terms of the Acquisition,
key management of Office will remain with the Business and reinvest a portion of their
sale proceeds to retain a minority stake in the Business.

2. Overview of Office

Office is the leading young fashion footwear retailer in the UK and Republic of Ireland
offering men’s, women’s and sports footwear to fashionable 16 - 25 year olds at the
mid-level price range.

Office was founded in 1981 and has since grown to 104 stores and 47 concessions in
the UK, as well as 5 in the Republic of Ireland, trading under the “Office”, “Offspring”,
“Poste” and “Poste Mistress” brands. In 2014, Office commenced expansion into
continental Europe and has to date opened 6 stores in Germany. Office also operates a
successful e-commerce business which now accounts for approximately 20% of sales.

3. Transaction Rationale

The Acquisition marks the entry of Truworths into the northern hemisphere markets.
The UK retail market is characterised by the presence of several large urban
agglomerations, and a high proportion of young educated adults, with a sizeable share
of disposable income.

Office is a highly attractive business with strong prospects which, under Truworths’
ownership, will be further enhanced. The Business is well positioned in the fashion
footwear market with potential to expand into many new stores in the UK and Germany
in the short to medium term and into other European countries in the medium to longer
term. It’s rapidly expanding e-commerce business will be a platform for category and
range extension.
The Acquisition enables the Truworths group to expand its operations, extend its
product offering, benefit from currency diversification and balance its revenue between
cash and credit sales.


4. Acquisition Consideration

Truworths is acquiring 88.9% of Office at an enterprise value of £256 million (on a 100%
basis) with the existing Office management team reinvesting a portion of their sale
proceeds and retaining an 11.1% stake.

The Truworths group and the Office management team have entered into put/call
agreements which give the Truworths group the right to buy, and management the right
to sell, the management stake over a 3 – 5 year period after the Acquisition. In terms of
the agreements, the management shares will be valued at an agreed EBITDA multiple,
with additional value accruing if certain performance targets are met.

The Truworths group will fund the Acquisition and settle existing Office debt, as well as
transaction expenses, through a combination of:

   -   Approximately R3.6bn of cash from South Africa to pay the consideration due to
       the sellers and the said expenses, and
   -   £80m of term loans and £5.9m of revolving credit facilities in the UK, to refinance
       existing Office net debt.

5. Net Assets Acquired

The Net Assets of Office at 25 January 2015 (being the date of the most recent
consolidated audited annual financial statements) were £59.5m. For the year ended
25 January 2015, Office generated sales of £270.2m.

6. Effective Date

The completion date of the Acquisition is expected to be no later than 24 December
2015.

7. Conditions Precedent

The Acquisition is subject to final approval from the Financial Surveillance Department
of the South African Reserve Bank.

8. Categorisation

The Acquisition is a Category 2 transaction for the Company as contemplated in the
Listings Requirements of the JSE Limited.

9. Withdrawal of Cautionary Announcement

Shareholders are advised that, as a result of the publication of this announcement, the
cautionary announcement of 14 September 2015, as renewed on 27 October 2015 is
now withdrawn and caution is no longer required to be exercised by shareholders when
dealing in their Truworths shares.

30 November 2015
Cape Town

Financial Advisor to Truworths
Goldman Sachs International

Legal Advisors to Truworths
Edward Nathan Sonnenbergs Inc. (South Africa)
Shoosmiths LLP (United Kingdom)

JSE Sponsor
One Capital

NSX Sponsor
Old Mutual Investment Services Namibia (Pty) Ltd

Lead Arranger, Bookrunner, Underwriter and Investment Bank (South Africa)
The Standard Bank of South Africa Limited

Lead Arranger, Bookrunner and Agent (United Kingdom)
Lloyds Bank plc

Date: 30/11/2015 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story