It’s not uncommon for large companies to sell their assets, as a result of debt, or even to channel funds to stronger areas of their business. A business asset is an item of value owned by a company, whether tangible or intangible. Assets can vary from a chain of stores to land, long-term investments, and so on.
Due to the coronavirus pandemic, many fashion retail stores experienced a dip in their marginal profit, which either led to complete closure of the business or serious loss in business. The Edcon fashion retail group is one of the companies that was affected due to the pandemic, and in a bid to keep the company afloat, the board decided to sell their JET shares to The Foschini Group, TFG, for $28.7 million.
And as Grant Pattison, the CEO of Edcon shared in March,
“Management will continue to look at all options and there may be some tough recommendations made to the board after the lockdown period, including having to consider business rescue.”
About Edcon Limited
Edcon Limited is the leading clothing, footwear, and textiles retailing group in South Africa that trades through a range of retail formats. The retail group which has been in existence for about 90 years has 3 principal brands under which it operates; Edgars, JET, and thank U.
However, when the total lockdown was announced in South Africa, and fashion stores were to be closed until further notice, the Edcon group experienced a great loss of about $108 million. They had to lay off over 20,000 staff, as well as file for voluntary business rescue.
As a result of this, the board announced they were selling JET and Edgar assets to regroup and become successful again.
About The Foschini Group And The Acquisition
The Foschini Group which recently acquired JET assets from Edcon Limited is also a fashion retail company based in South Africa. With a chain of about 3,000 stores including Markham and SportSense, The Foschini Group is set to acquire selected assets of JET, and 371 stores which the Edcon group owns for $28.7 million.
One thing to note about this deal, just like in other acquisitions, is that JET stores all over South Africa would still be open for business, perhaps with a different strategy and structural changes. This deal would also include the transfer of selected JET key executives and staff to ensure sufficient management capacity and continuity to deliver on the current turnaround plan for JET.
“JET is a leading South African retailer by brand recognition and market share, and would provide the Foschini Group with a strategically important expansion into the value segment of the South African retail apparel market.” – TFG
This acquisition would also provide the Edcon Group a chance to regroup and channel its limited resources into other brands associated with the company.