Max Gebhardt
FEARS are growing that South African Breweries (SAB) may have to offload troubled retail subsidiary OK Bazaars after years spent trying to turn the operation around.
The group, whose interests also include beer, windscreens and men’s clothing, attempted this week to scotch growing market speculation that the OK is flying a For Sale sign. “It is absolute nonsense,” executive chairman Meyer Kahn says.
But analysts say it is common knowledge in the industry that Kahn will happily accept a reasonable offer for the business. Union leaders are due to meet OK at the end of this month to discuss possible sale plans.
Other analysts say SAB, which controversially delisted OK in 1994 in order to quietly restructure, is reluctant to publicly admit OK is open for buyers, so tacitly admitting defeat.
But two British groups – Tesco and Sainsbury – have been touted as possible buyers. Tesco, whose target market is similar to OK’s, refused to confirm or deny reports that it was on the prowl.
However, union sources say that executives from several overseas firms have been spotted on the shopfloor in recent months.
OK has long been the weak link in SAB’s chain of businesses – it made a R1-million loss in the 1996 financial year on sales of R6,1-billion.
In the six months to September 1996, however, it is believed to have sustained losses of around R20-million (as an unlisted company it does not have to detail results). Analysts expect it to lose up to R70-million for the year to March 1997 – hit by its heavy debt burden, lower consumer spending and tightening competition.
OK Bazaars, which runs The Hyperama and OK Stores, has been plagued for years by poor management and heavy debt, analysts say.
SAB’s shortcomings included weak management, run-down stores, an unmanageable logistics system and badly trained personnel.
Should a foreign retail firm buy into OK Bazaars it would represent the first foreign investment in the sector since the election – heralding a competitive environment players such as Pick ‘n Pay have been anticipating for months.
The involvement by Tesco in particular would be intriguing.
The listed retail chain spent much of the late 1970s and early 1980s attempting to recreate itself. It is now one of Europe’s largest supermarket businesses.