South African retailer The Foschini Group (TFG) has acquired Retail Apparel Group (RAG) in a $302.5 million deal that will see it pursue the possibility of a broader Australian expansion.
RAG’s major shareholder, Navis Capital, will sign away a 100 per cent stake to the Johannesburg listed retailer, which will bring RAG into its stable of 22 brands – including furniture retailer, @home, and apparel brands Fabiani, Exact and Next.
TFG will use the acquisition to establish its Australian presence before assessing whether to expand further Down Under, with RAG’s senior management, including chief executive Gary Novis, staying on to play an ongoing role in the expansion.
Speaking to Inside Retail on Friday morning, Novis said that TFG is “very keen” on expanding its international brands into Australia and will now benefit from RAG’s established presence in the local market.
“I’m not privy to their strategies, but certainly in their discussions they are very keen and believe that some of their brands would absolutely be suited for our market over here,” Novis said.
“They will have a strong retailer here to add consistent growth in Australia that will help them potentially launch some of their brands here.”
The transaction is set to complete in Q317 and comes after Navis Capital decided against a long considered initial public offering (IPO) for RAG, which owns and operates Tarocash, Connor, yd., Johhny Big and Rockwear across more than 400 Australian stores.
Navis said the decision to move away from an IPO wasn’t a result of tough retail conditions, given that RAG posted double-digit sales growth this year, but was due subdued expectations among investors in the broader market.
“This opportunity offered shareholders a 100 per cent exit,” Novis said. “Retail conditions aren’t weak at the moment, we haven’t felt that – but market sentiment among analysts and investors for retail companies is quiet low.”
TFG’s investment in the Australian market comes after its acquisition of several retail brands in the UK in recent years, including clothing chain Whistles and high street fashion brand Phase Eight. The group owns more than 3,000 outlets globally across the clothing, homeware, jewellery and sporting categories.
“We are excited to be able to realise our ambition to expand into Australasia through the very successful RAG business and its well established and experienced management team,” TFG’s CEO Doug Murray said.
The company posted an 11.6 per cent increase in group turnover to $2.4 billion for the year ended 31 March 17 in its preliminary results this morning, underpinned by a 6.8 per cent increase in earnings.
RAG is being advised by Fort Street Advisers, EY and King & Mallesons.
TFG has been contacted for further comment.
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