The company which has committed to buying parts of Edgars will only take some of the chain’s stores as part of the deal, Edcon’s CEO said on Tuesday. The rest will presumably be closed.
The massively indebted Edcon, owner of Edgars and Jet, was in a battle for survival even before the coronavirus crisis. But the national lockdown, during which clothing retail was forbidden for weeks, has dealt the company a lethal blow.
Edcon was placed into business rescue 10 weeks ago, and according to a business rescue plan that was recently approved, parts of the company will now be sold off.
The 36-year-old company, Retailability, which has more than 400 clothing stores in South Africa and elsewhere, has agreed to buy some of the Edgars assets.
In an interview with The Money Show on 702 and Cape Talk, Edcon CEO Grant Pattison said that Retailability has committed to buying a “minimum” number of stores as part of the new deal.
“You can’t force a buyer to buy something. They make an offer for what they want to buy.”
He says the company has done intensive due diligence of the entire Edgars business.
“They want to – which makes sense – buy the profitable bits of Edgars. Some stores make a profit and some stores make a loss.”
Retailability bought the Legit store chain from Edcon in 2016. Pattison says the Edgars arrangement was reached quite quickly as Retailability already had a good understand of the Edcon business.
The BRP team and Retailability are now going “door to door” with landlords to agree the terms of the deal. The transaction is subject to landlords approving the deal, as well as employees and the Competition Commission.
Four groups are interested in Jet, and hopefully a similar memorandum of understanding (than with the Edgars) will be completed this week, Pattison said.
Edcon sold CNA to a consortium lead by Astoria Investments, an investment firm controlled by the asset manager RECM and Calibre Limited earlier this year.
Pattison said that it will be a “significant achievement” to save the majority of stores and jobs in Edcon.
“For the South African consumer, I think Edgars and Jet are good businesses, they needed some restructuring, and everyone would be pleased that they survive and continue to serve customers.”
Last year, Edcon was saved from collapse by securing a R2.7 billion lifeline – a deal struck with landlords, the Public Investment Corporation, and creditors. It has already shut the loss-making Boardmans and Red Square chains.
