THE FOSCHINI Group (TFG) yesterday announced that it would acquire Tapestry Home Brands – which owns Coricraft, Dial-a-Bed, Volpes and The Bed Store – for R2.43 billion as it expands into the homeware space.
The purchase is still subject to approval from competition authorities, but if approved, it would expand TFG’s business which would include producing furniture and mattresses.
Tapestry owns 175 stores in South Africa, Namibia, and Botswana and has manufacturing facilities in Cape Town, Johannesburg, and Gqebera, and makes about 47 percent of products locally.
The acquisition will also help TFG not to rely on the import markets amid increasing costs and the Covid-19 pandemic disruptions on supply chain.
The retailer also owns factories in Caledon and in Maitland that produce clothing for TFG.
According to the JSE-listed TFG, it will not raise debt to purchase Tapestry.
The apparel, homeware, and jewellery retailer said the value of Tapestry’s net assets was R115 million on February 28, 2021. “For the 11 months ended January 31, 2022, the value of the net assets of Tapestry, based on unaudited management accounts provided by the Sellers, was R209m,” it said.
TFG said the transaction was in line with its stated strategy of vertical integration in key product categories.
“The transaction will provide TFG with exposure to new products and categories as well as new customers that will complement the current TFG customer base in existing categories. “Furthermore, Tapestry’s unique business model, with easily scalable local manufacturing and distribution capabilities, is an excellent strategic fit for TFG,” it said.
Following the acquisition, TFG said it would have nine home consumer brands @home, @homelivingspace, Jet Home, Coricraft, Volpes, Dial-a-Bed, The Bed Store, Granny Goose, and Biggie Best, and four vertically integrated factories, mattresses, upholstered furniture, household textiles, duvets, and pillows.
“This acquisition will offer TFG an expanded distribution network and its last-mile furniture delivery and assembly service,” TFG said.
Umthombo Wealth assistant portfolio manager Nomtha Ngumbela said TFG had a net debt of R800m, thus the group’s balance sheet was not stretched by the acquisition. “Through the purchase of Tapestry, TFG will grow its presence in the textile and homeware space by an existing network of 175 stores.
“Brands such as Coricraft and Volpes potentially target a similar mid to highend customer the group is familiar with given their @home brand, however, their ability to navigate a more value-orientated customer in the homeware and furniture space will now be tested even further with the introduction of The Bed Store to their portfolio while, at the same time, the group is relaunching and scaling Jet Home,” she said.
Ngumbela said TFG’s management had the vision to not only expand their portfolio into a robust and innovative offering, but also to develop competitive local manufacturing and procurement capabilities.
“This is a big job, especially when considering that the group must also contend with acquisitions of wellknown companies.
“Management’s execution of capital allocation is going to key in the coming years with investors looking to see if a seamless integration like Jet into TFG can be achieved again,” she said.
TFG’s share price in afternoon trade was 3.13 percent lower at R122.05, but 26.23 percent lower over three years. The share closed 3.21 percent lower at R121,98 on the JSE yesterday.
BUSINESS REPORT ONLINE