Johannesburg - Supermarket group Pick n Pay Stores [JSE:PIK]
announced on Tuesday that it has purchased another 24% of Zimbabwe operation TM Supermarkets, bringing its total shareholding to 49%.
The transaction, which is conditional on the approval of the relevant Zimbabwe regulatory authorities and the South African Reserve Bank, is expected to close by the end of March 2011.
Pick n Pay CEO Nick Badminton
said that the deal, worth about $13m (R90.7m), was signed on October 27.
"Meikles and Pick n Pay have entered into a shareholder's agreement to drive this initiative. 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."
The TM Chain is the largest chain of retail stores in Zimbabwe by number of stores, with 51 retail outlets.
Further into Africa, Pick n Pay operates 17 stores in Namibia, 12 in Botswana, 7 in Swaziland and 1 in Lesotho, together with the first Zambian store which opened in July.
Pick n Pay's strategy into Africa has mainly been through partnering with locals and the franchise route, where local experts own the franchise in their own communities. Direct investment is considered on a case by case basis and the corporate store opened in Zambia is an example of this.
This investment in TM will inject new capital into the business and allow for much-needed refurbishment, including new fittings, generators and point of sale equipment.
Specifications that were under review by the Zimbabwe government have now been lifted and the relisting of Meikles, the remaining shareholder, was implemented in March 2010 on the Zimbabwe Stock Exchange.
"Pick n Pay first made the investment in TM in 1996. 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.
"The conversion to the US dollar as the currency in Zimbabwe has provided a significant amount of stability and was a key factor in our decision to purchase this additional shareholding. 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.