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Naspers CEO: Merger vital for SA etail growth

Cape Town – The proposed merger between takealot and Kalahari is vital to build a healthy etail business in a country where there is still a low share of ecommerce, according to Naspers [JSE:NPN] CEO Bob van Dijk.

BACKGROUND: Kalahari to merge with takealot

Article update: takealot responds to Fin24 questions (see Q&A below)

“In a highly competitive market like SA, with still a low share of ecommerce as a percentage of total retail, we need to get more scale to build a healthy business, as both companies make substantial losses at the moment, Van Dijk told Fin24.

“We believe that together with takealot, we have a better chance at developing a great consumer etail proposition.”

Tiger Global Management, who invested in takealot in 2010, helped raise over $100m (over R1bn) for takealot in May this year as part of its aggressive growth strategy in South Africa and sub-Saharan Africa.

takealot acquired 60% of Mr Delivery in January 2013, which they rebranded as Mr D.

In August, takealot acquired 100% of Superbalist.com, a Cape Town-based design and apparel etail.

If the deal is approved, Naspers and Tiger would each hold about 41% of the equity in the deal, according to Naspers investment relations officer (IRO) Meloy Horn. (See Q&A below)

takealot has in recent months gained strong momentum, more so than Kalahari, said takealot CEO Kim Read. "In negotiations, it was decided that the takealot brand would be better suited to take the merged business to the next level." (See Q&A below)

Until the merger is approved by the South African Competition Commission, it’s business as usual at Kalahari.com, said CEO Caren Genthner-Kappesz. “Should the merger be approved, the new entity will operate under the takealot brand.” (See Q&A below)

Q&A with Kalahari.com CEO Caren Genthner-Kappesz:
 
What major changes will take place at Kalahari?

Nothing will change until the merger is approved. Then there will be a period of realignment between the two brands. We’ll release more information once that’s clarified.

Are you excited about the merger? Is this good news for Kalahari?

Yes, this is an exciting move. We are proposing this merger because of the huge potential we see in the South African market. We want to give ourselves the best opportunity to take advantage of this growth.

Competition is increasing in South Africa, from both the brick and mortar retailers and there is always the threat of international players like Amazon and Alibaba.

If we don’t join forces we will have a tough time surviving in such a dynamic and competitive market.  Together, we can focus our efforts on building a winning product and customer experience.
 
What message do you have for your staff?

We informed our staff this morning (Tuesday) and they’ve received the same information that we included in the press release. It’s business as usual for the festive season – both companies will continue to focus on growth and great customer experience. 
 
Q&A with Naspers Group IRO Meloy Horn:

What are the details of the merger?

Naspers and Tiger Global, the US-based investment firm, will both have a 41% stake. Founding management of takealot and other minorities will own the rest.

How will the brand of Kalahari be affected?

Due to the stronger momentum on the takealot side, we have chosen the takealot brand moving forward - if the merger is approved.

What strengths will takealot and Kalahari bring to the merger?

This transaction is a win-win for both parties as the merger will create a platform of scale, which is essential to succeed in retail; and to compete effectively against local brick and mortar retailers and offshore retailers.

It will also strengthen the value-proposition of the ecommerce offering by bringing a wider selection of products and categories, as well as broader delivery services to customers.

What other Naspers ecommerce moves can we expect?

We remain committed to building out or ecommerce business around the world with a focus on growth and business model expansion. We are stepping up growth in classifieds, accelerating growth in etail and pushing new growth areas such as online services.

Q&A with takealot CEO Kim Read:

What major changes will take place at Kalahari that you can speak of?

Once the merger is approved it is the intention to retire the Kalahari brand and operate under the takealot.com brand.

What is the secret behind takealot’s success?

We have been very fortunate to date to have great staff and management who focus first and foremost on our customers.

Why the takealot’s name and brand? Why not Kalahari.com and why not a new name?

takealot has in recent months gained strong momentum, more so than Kalahari. In negotiations, it was decided that the takealot brand would be better suited to take the merged business to the next level.

Who will manage the deliveries of the merged entity?

takealot has its own logistics infrastructure, while also making use of third party courier companies. This will be no different in the merged entity.

How will the management of Kalahari be involved? The co-CEO’s of the new company are both from takealot?

As already announced [CEO] Kim [Read] and [CTO] Willem [van Biljon] will continue to lead the company under the takealot brand with Kalahari employees transferring across to takealot.

Will this new entity not be a monopoly and will it get resistance from stakeholders and other players?

takealot and Kalahari compete with both brick and mortar retailers and other local and international online retailers.  The combined business is in reality still a small competitor in the consumer goods retail market.

If it is approved by the authorities, when do you expect this to happen and what is the time-frame then of the new operations?

The timeline for the approval from the commission is somewhat unclear, but we expect the deal to be approved towards the end of this year or early 2015.  

Is less competition in the market beneficial for the consumer?

takealot and Kalahari compete in the consumer goods retail market. This market includes the local brick and mortar retailers as well as other local and offshore online retailers. The merged entity will create more scale to compete against these current competitors; there is therefore no lessening of competition in the market.

* Kalahari.com is a part of Naspers, the owner of Media24, Fin24's parent company.

- Fin24

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