South African fashion retailer Mr Price (MRPJ.J) is making its European debut by acquiring German discount retailer NKD Group for up to €487 million ($568 million). The deal marks a significant strategic expansion for the company.
Following the announcement, Mr Price shares fell 12.3% by 1212 GMT, as investors questioned both the price and the implications of this overseas move.
NKD, which operates 2,108 stores across seven Central and Eastern European countries, including Germany, Austria, Italy, Croatia, Slovenia, the Czech Republic, and Poland, was highlighted as a strong strategic fit.
Market data indicates that value retail is growing faster than the broader European market, now accounting for roughly 22% of the sector.
CEO Mark Blair said, “After meeting the NKD team, it was evident that this was the right business to pursue. Like us, they are value-retailers at heart and have a very clear understanding of who their customer is and how to best serve them.”
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The acquisition, from an entity owned by funds managed by TDR Capital LLP, includes all shares and income from shareholder loans. Funding will come from a mix of Mr Price’s existing cash reserves and debt facilities.
With NKD, Mr Price’s annual revenue is expected to rise from 40.9 billion rand to around 53 billion rand ($3.12 billion), while its store count will expand from about 3,100 to over 5,000, as seen on Reuters.
Investors remain cautious. Alec Abraham, senior equity analyst at Sasfin Wealth, noted concerns over past challenges faced by South African companies going offshore.
Casparus Treurnicht, portfolio manager at Gryphon Asset Management, added that the retailer appears “overpaying” for the acquisition, estimating it reflects a price-to-earnings ratio of around 35, which he considers high.
The deal will also add roughly 5–6 billion rand in borrowings to Mr Price’s previously debt-free balance sheet, excluding leases.
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Image Credit: Daily Investor
