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MR PRICE GROUP LIMITED - Voluntary announcement relating to the acquisition of Power Fashion

Release Date: 26/11/2020 10:13
Code(s): MRP     PDF:  
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Voluntary announcement relating to the acquisition of Power Fashion

Mr Price Group Limited
(Registration number 1933/004418/06)
Incorporated in the Republic of South Africa
ISIN: ZAE000200457
LEI number: 378900D3417C35C5D733
JSE and A2X share code: MRP
(“Mr Price” or “the group”)



Mr Price is pleased to announce that on 20 November 2020 it concluded an agreement to acquire high performing value
retailer, Power Fashion, which currently has 170 stores across Southern Africa. Its differentiated business model gives
the group access to a wider customer base and the opportunity to significantly scale further.


Power Fashion was founded in the 1950’s and is a high growth, family owned apparel retailer based in Durban, South
Africa. It is value-focused and cash-based, servicing low to middle income households. It offers merchandise for the
whole family, retailing largely apparel merchandise but also offering cellular products, basic household items, value
cosmetics, electricity and other opportunistic products.

Power Fashion merchandise is fashionable, but not fashion forward. It focuses on the deep value segment of the market
and its price positioning is strongly aligned to its target customer base. Stores are typically high street and community
centred malls rather than regional and super regional locations.


The group’s strategic research has helped identify clear opportunities for growth, both organic and acquisitive. It has
frequently communicated to shareholders its strict investment criteria for an acquisition, which has guided it as it has
considered several opportunities in the last year. In Power Fashion, the group will acquire a business that meets each
of these closely researched criteria:
-    Value focused business that predominantly trades in cash and is aligned to the group’s core capabilities
-    Fits within the group’s capital allocation strategy and is bolt-on in nature (the size of the transaction is
     approximately 4% of market capitalisation)
-    High performing business with a strong track record, eliminating the need for any turnaround strategy and
     avoiding the associated management distraction and integration costs
-    An existing business of attractive scale which is available at a reasonable valuation. Immediately earnings
     accretive and not dependant on synergies
-    Opportunity for significant future growth in footprint and categories
-    Low risk as opposed to acquiring an unknown territory with additional foreign exchange risk
-    Strong management and skilled team to prevent distraction and ensure continuity

Mr Price CEO, Mark Blair, said: “Mr Price and Power Fashion share a similar set of values which makes this acquisition
a great fit. Power Fashion was built on a similar entrepreneurial mindset to Mr Price and also offers exceptional value
to its customers. We both have high performance cultures and are equally focused on strategic growth. Our sufficiently
differentiated business models and target customers will enable strong positioning in both the deep-value and fashion-
value segments of the market. We are pleased that we will provide immediate returns to our shareholders, as well as
continue to deliver on our respective promises to our customers.”

Noel Otto, CEO and majority shareholder of Power Fashion, said: “It has been an incredible journey building our
business into what it is today. Our team is immensely proud of what we have achieved. In some ways, the journey has
only just begun, and I couldn’t think of a better way forward than for Mr Price to take the baton and continue the growth
trajectory. Both companies are driven by a strong entrepreneurial spirit and I look forward to seeing Power Fashion grow
into a significant contributor to the Mr Price growth story. We have kindred cultures and along with the continuity provided
by my management team, I believe that the transition will be a smooth one.”


The targeted effective date of the transaction will be April 2021 to align with the start of the group’s new financial year
(FY22). However, this is subject to the fulfilment of both regulatory and commercial suspensive conditions, as are usual
for such transactions. These conditions include competition authority approval in South Africa and Eswatini. The
transaction will be settled in cash.

The existing management team and all Power Fashion employees will transfer to Mr Price, and a new managing director
will be appointed in due course. Noel Otto will retire on the effective date but will conclude a consulting agreement for a
period post the effective date to provide continuity.

26 November 2020

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 26-11-2020 10:13:00
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