2 August 2012
South African retail group Woolworths Holdings is to expand its footprint in Australia through subsidiary Country Road’s acquisition of fashion brand Witchery Group, the company announced in Cape Town on Wednesday.
The deal, worth AU$172-million, is expected to boost Woolworths’ operations in Australia, which began in 1998 when the South African company secured an 88% controlling interest in Country Road.
Woolworths rebuilt Country Road and re-launched the brand in 2004. “It was successfully repositioned, grew sales, and won the retail industry’s top honour as Australian Retailer of the Year in 2008,” Woolworths said in a statement.
“The acquisition of Witchery Group creates one of Australia’s largest speciality fashion retailers with complementary brands and a strong position in the mid to upper tier specialist retail sector,” said Woolworths chief executive officer and Country Road chairperson, Ian Moir.
“The acquisition delivers an attractive portfolio of owned brands, greater scale, diversified revenue streams and industry leading margins.”
Witchery Group’s portfolio is made up of two brands, Witchery and Mimco. “With 40 years of trading, Witchery is a leading fashion brand offering women’s, men’s and kids apparel and accessories with 210 stores and concessions in Australia, New Zealand, South Africa and Singapore,” he said.
Mimco sells luxury bags, jewellery, shoes, sunglasses and watches with 96 shops and concessions in Australia, New Zealand and Singapore, as well as a successful online business.
The group is performing well financially and made $266-million in revenue in 2011.
“The acquisition has the capacity to create significant shareholder value through the delivery of synergies that are estimated by Country Road management to be approximately $10-million on an annualised basis and expected to be achieved over four years,” Moir said.
These synergies refer to supply chain efficiencies, integration of systems and structures, optimisation of sourcing opportunities and increased growth opportunities in new geographies, categories and channels.
The deal will also allow Woolworths – through Country Road – to consolidate its position in Australia.
Funding for the acquisition will come through a combination of acquisition debt worth $92-million raised from Australian banks and a rights issue by Country Road, which Woolworths as majority shareholder will follow. It has already received the required exchange control approvals from the South African Reserve Bank.