2 November 2010
South Africa’s Pick n Pay has increased its investment in Zimbabwe’s TM Supermarkets with the purchase of an additional 24% stake, worth about US$13-million (about R90.1-million), taking its shareholding in the retailer to 49%.
The stake has been acquired from Zimbabwean group Meikles Limited. The TM chain is the largest chain of retail stores in Zimbabwe by number of stores, with 51 retail outlets.
“Meikles and Pick n Pay have entered into a shareholder’s agreement to drive this initiative,” Pick n Pay CEO Nick Badminton said in a statement this week. “Certain stores will be re-branded as Pick n Pay stores, so that we can provide a retail experience similar to that provided in South Africa.
“We welcome the opportunity to participate more meaningfully in the stabilisation of the Zimbabwe economy, and are excited to participate in the turnaround that is expected.”
Africa expansion strategy
Pick n Pay’s strategy into Africa has mainly been through partnering with locals and through the franchise route, where local experts own the franchise in their own communities. Direct investments are considered on a case-by-case basis, such as with a corporate store that was opened in Zambia.
Currently, Pick n Pay’s foreign operations include 17 stores in Namibia, 12 in Botswana, seven in Swaziland, and one each in Lesotho and Zambia.
“Pick n Pay first made the investment in TM in 1996,” said Badminton. “TM has done an extremely good job in this business during very difficult times, facing and enduring severe economic deprivation, hyperinflation, currency collapse and an erratic merchandise availability.”
Improving economic stability
Badminton added that the conversion to the US dollar as the currency in Zimbabwe had provided a significant amount of stability and was a key factor in Pick n Pay’s decision to purchase the additional shareholding.
The investment in TM Supermarkets will inject new capital into the business and allow for much-needed refurbishment, including new fittings, generators and point of sale equipment.
“With the additional capital available, we believe there is significant upside potential in the TM operation, which is extremely well-run and well-regarded in Zimbabwe,” said Badminton.
The transaction is still subject to approval from the relevant Zimbabwean authorities and the South African Reserve Bank, and is expected to be completed by the end of March 2011.
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