TWO Power Sales managers have snapped up the firm’s stake at a paltry US$3 million.
Presently the Competition and Tariff Commission (CTC) board is looking into the deal in which two Power Sales executives, finance director Elana Maria Chicksen and general manager Fanuel Mahachi, through their newly formed company Giant Tree have acquired 80% of the issued share capital in At The Ready Wholesalers (ATRW) from sellers Pep stores and Tendril.
Pepkor and Tendril owned 40% stake each in ATRW. Pepkor is 100%-owned by Pep stores.The acquiring firm, Giant Tree holds no other investment and its shareholding is equally shared between Chicksen and Mahachi.
At The Ready Wholesalers (ATRW), the local company that operates Power Sales, has traded in Zimbabwe for four decades.
“Giant Tree, an investment holding company, which was formed by two former directors is targeting Power Sales trading homeware, clothing, footwear. The purchase consideration is US$3 and the deal has been notified in line with the competition act,” a source close to the transaction said.
South Africa’s Pepkor announced on November 25 2019 that it was selling its remaining Power Sales outlets in Zimbabwe after a R70 million (US$4,12 million) exchange loss in the year hurt group performance.
Pepkor exited the local market last year citing operational challenges. South African media reported that the company whose brands include Pep Stores, Ackermans, Dunns and Shoe City, had closed the remaining 20 stores in Zimbabwe, bringing to an end its close to 40 years presence in the country.
Most companies have been struggling to stay afloat due to the country’s economic decline characterised by a deepening liquidity crunch, foreign currency shortages, low capacity utilisation and runaway inflation, which stands at nearly 800% which has decimated incomes and pensions denominated in the Zimbabwean dollar. This has led to a severe reduction in disposable income, which has had a devastating impact on retail outlets which have experienced reduced sales.
Contacted for comment, CTC director Ellen Ruparanganda confirmed handling the transaction but declined to comment on whether the firm was being sold at a fair price.
“Yes, the Commission is handling the matter,” Ruparanganda said.
Mahachi said that the deal had ensured that none of the staff at the Power Sales outlets would lose their jobs.
“Pepkor which trades under the Power Sales brand in Zimbabwe has concluded the sale of its 80% shareholding to Giant Tree (Private) Limited. The sale is subject to the approval of regulatory bodies in Zimbabwe. While the terms and conditions of the purchase price are confidential, Pepkor is of the view that this was done at fair value considering the current market conditions and outlook,” Mahachi said.
“A key benefit of the sale has been job security as no employees across the business will be retrenched. Pepkor believes the transaction will also further opportunities for employment in the future. The decision to exit Zimbabwe is based on the continued adverse macro-economic conditions affecting trading and the weakening currency.”
As of September 30,2019, ATRW’s turnover was ZW$12,8 million (US$156 670) with a total asset value of ZW$87,8 million (US$1,08 million).
Insiders say the value of the deal was justified as the firm was saddled with unspecified debts. It was not clear how much ATRW owes to its creditors.
“The value of the deal might be compromised by debts the company has with different stakeholders. CTC dwells mainly with products at play. It is worried primarily on the overlap of products in specified markets. The value of the deals normally is out of focus,” a source said.
In a statement last year the retail outlet said it would not close down its stores despite the exit of Pepkor.
Economist Victor Bhoroma said true value of a company can only be determined when you assess its viability in terms of revenues, assets and liabilities.
“Brand and physical presence in the Zimbabwean market does not reflect company value. Overall, I think it’s a fair price. Zimbabwean clothing industry is being battered severely by informal traders and cheap imports,” Bhoroma said.