Mr Price is betting nearly R10bn that German discounter NKD is its passport to European glory, but investors aren’t buying the fairy tale. With the share price hammered and a ‘worst deal in a decade’ tag from The Finance Ghost, this wolf dance could draw blood. “After meeting the NKD team, it was evident that this was the right business to pursue,” said Mark Blair, Mr Price group CEO.
“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.” His enthusiasm, unfortunately, was not shared by the market, with Mr Price shares plunging 18% between Wednesday morning and 4.30pm on Thursday. Market analyst, The Finance Ghost, who writes a weekly column for Business Maverick, said “it’s the worst deal I’ve seen in the last 10 years”.On his site, The Finance Ghost explains why. “Negotiating with private equity houses is a dance with wolves,” he explains.
“You might get it right, but there’s a good chance of getting bitten.” The Finance Ghost expressed disbelief at the deal having taken place at all. “Running straight into a 100% stake is such poor structuring that I can’t believe the board signed off on this,” he writes. “How many more South African retailers are going to try and get it right in Europe?
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…we have endless examples of local management teams who made similar mistakes in faraway lands.” However, Jonathan Rosen and Linda Zhang, partners at TDR Capital, commented, “The company’s progress is a testament to its talented management team, compelling product proposition, and the embedded data science capabilities that have helped turbocharge its growth. Mr Price Group is the ideal long-term home for NKD, offering a highly complementary platform within a market-leading value retail group that shares NKD’s ambitions for continued growth and innovation.” Headquartered in Germany with operations in Central and Eastern Europe, NKD was established 60 years ago and generated revenue of €685-million (~R13.6-billion) last year. Although NKD has a long history dating back to 1962, it has changed ownership multiple times since the founder, Burkard Hellbach, exited in 2001 when it became part of the Daun Group.
In November 2013, the Daun Group sold it to UK private equity firm OpCapita. Just under six years later, in May 2019, investment funds managed byTDR Capital bought 100% of NKD Group from OpCapita. Six years later, here we are with Mr Price putting its hand up as the latest buyer.
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