TFG beats Pepkor to secure Coricraft and Volpes owner for R2.35bn

Surprise deal for full control of Tapestry Home Brands will see the JSE-listed group increasing its share of the furniture, bedding and home décor retail market.
Tapestry operates around 175 stores across South Africa, Namibia and Botswana. Image: Coricraft website

The Foschini Group (TFG) on Monday announced a major acquisition of R2.35 billion, which, if approved by competition authorities, will see it own well-known furniture retail and bedding chains Coricraft, Volpes, Dial-a-bed and The Bed Store.

TFG beat fellow JSE-listed retail giant Pepkor to the deal to acquire the entire issued share capital of Cape Town-based Tapestry Home Brands from Westbrooke Investments.

This follows Pepkor reportedly looking at a buyout of the Coricraft and Volpes owner last year, with Bloomberg citing analysts in a story published in November.

Read: Pepkor makes offer for SA furniture owner

TFG’s surprise deal for full control of Tapestry Home Brands will see the group increasing its share of the Southern African furniture, bedding and home décor retail market. The group already owns the upmarket @home retail chain as well as the Granny Goose bedding brand.

“TFG is acquiring the sale shares from Westbrooke Investments Proprietary Limited, funds managed by Actis, as well as the current and previous management of Tapestry,” the group said in a Sens statement.

“Established in 2005, Tapestry is a prominent direct-to-consumer, vertically integrated designer, manufacturer and omnichannel cash retailer of home furnishings serving consumers’ living and sleeping needs, targeting the middle-to-upper LSM markets,” it noted.

“The Tapestry brands include popular made-to-order furniture retailer, Coricraft; South Africa’s renowned branded bedding retailer Dial-a-bed; home textile retailer, Volpes; and value bedding retailer, The Bed Store.”

“The Tapestry brands are well positioned for growth in the medium to long term. Tapestry’s own, locally-manufactured product accounts for [circa] 47% of net sales, employing a total of approximately 2 500 people, with manufacturing facilities located in Cape Town, Johannesburg and Gqeberha,” added TFG.

Tapestry operates around 175 stores across South Africa, Namibia and Botswana.

Expanded product range and customer base

“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,” the group said.

“Furthermore, Tapestry’s unique business model, with easily scalable local manufacturing and distribution capabilities, is an excellent strategic fit for TFG.

“The transaction is in line with TFG’s stated strategy of vertical integration in key product categories, and the continued development of its quick response local manufacturing capability.”

Read:
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The group added that “opportunities exist to further leverage the strength of the manufacturing and sourcing capabilities of both businesses and to continue developing local procurement in a segment dominated by imported goods”.

TFG currently has more than 27 500 employees in South Africa and the deal will see its overall staff numbers top the 30 000 mark. It will also see a further 3 manufacturing facilities added to the group’s growing local production footprint.

“Following the acquisition, TFG Home Division will have nine home consumer brands [@home, @homelivingspace, JetHome, 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],” the group noted in a media statement.

“TFG will also have an expanded distribution network and its own last-mile furniture delivery and assembly service,” it added.

Commenting on the deal TFG CEO Anthony Thunström said: “This is an exciting opportunity of scale to acquire a prominent player in the fast-growing consumer home furnishings sector while unlocking manufacturing and distribution synergies with adjacent brands in the TFG stable.”

He added: “The Tapestry brands are well positioned for accelerated growth in omnichannel retailing and will particularly benefit from TFGs leading capability in this area. Furthermore, those brands have solid plans in place to take full advantage of the strong tailwinds and favourable consumer trends in the home furnishings sector.”

Thunström noted that lead indicators for this sector include listings of homes for sale, with around 400 000 currently up for sale on top online portals, and actual sales of around 50 000 a month.

“This creates multiple homeware and furnishings opportunities – in the kitchen, bedrooms, living rooms, and outdoor spaces,” he said.

Thunström said TFG remained confident and committed to investing in South Africa despite the July unrest and rioting of last year.

Martin Sacks, executive chairman of Westbrooke Group, which is the lead shareholder of Tapestry Home Brands, said: “The company [has] an excellent management team and could not have wished for a better home than TFG.”

“Tapestry’s reputation for delivering quality, personalisation, style and value, and nationwide last-mile distribution capabilities, have secured steady growth both in-store and online, alongside strong historic profitability.”

Meanwhile, TFG noted that implementation of the agreement is subject to the fulfilment of conditions precedent normal for a transaction of this nature, including approval by the relevant competition authorities.

“We are delighted to have reached agreement on the acquisition and look forward to bringing our consumers more choice and customisation across the TFG stable, as we bring our scale to bear in growing the Tapestry businesses,” said Shani Naidoo, TFG group director for the Homeware Division.

“This R2.35 billion investment in our homeware and local manufacturing capability is strongly aligned to the government’s furniture Masterplan. We will continue to work to support Minister [Ebrahim] Patel’s plan to grow employment, develop skills and reindustrialise the sector. Our intention is to grow the Tapestry brands aggressively and thereby create new jobs in the business,” she added.

Listen to Thunström speaking about the deal one SAFM Market Update: 

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