Lynda Loxton
ANOTHER black empowerment deal emerged this week when black-controlled LA Retail Stores announced it had bought branded clothing and footwear marketer Skye Products for R115,6-million.
Gauteng-based Skye, best known for distributing international brands of running shoes and clothing to stores and independent retailers throughout the country for the last 32 years, will treble the size of Cape-based LA Retail.
Skye chairman Brian Zylstra said he had been attracted to the deal by LA’s strong emphasis on building brand names and the fact that “I don’t believe any company will survive the year 2000 without black empowerment.”
In addition, while Skye focused on the mass market, LA Retail focused on high-fashion retailing, which meant they were not in competition.
LA Retail chief executive Abdul “AK” Peer said that there was a strong synergy between the two businesses, which would give LA Retail exposure to the full spectrum of the South African market.
Peer said the deal would be financed by placing four million ordinary shares at 425c a share with LA management and 24,6- million N shares at 400c each with institutional investors, the existing management team of Skye and business associates of LA Retail.
It would be based on profit warranties of a pre-tax profit of not less than R22-million in the period to February 28 1998.
Peer said “virtually all” institutional investors and several black empowerment groups had taken up the offer.
The deal is effective from March 1 and is expected to boost LA’s earnings to 27,5c a share from 19,2c and its net asset value per share to 83,8c from 52,6c.
Skye Products is the only South African licence holder of international brands such as Converse, Saucony and Dickie and supplies more than 3000 independent retails as well as major chain stores. It also distributes Mille, Jump and Brentwood footwear.
Its turnover for the financial year to February 28 was R110-million with pre-tax profits of R17,5-million.
Peer said the two business would retain their separate identities and management teams and that LA Retail’s Samson brand would be moved to the branding division of Skye within the next few weeks.
“We are confident that Skye’s proven management and branded products will significantly enhance the growth of LA Retail Stores,” Peer said.
Zylstra has agreed to stay on for the next 18 months while other top Skye managers have been given five-year contracts so as not to disrupt management.
Asked how Skye was being affected by illegal imports, Zylstra said this had been a factor but the work by British customs officials at Durban harbour and the introduction of quotas was beginning to have the desired effect.