Edcon and Absa Bank Limited ("Absa Bank" or " Absa") agree terms for sale of Edcon's private label store card portfolio
06 June 2012
Johannesburg, South Africa – Edcon, South Africa’s largest non-food retailer with 1,167 stores, today announced the sale of its private label store card portfolio to Absa Bank Limited (“Absa”), a member of Barclays, for an estimated R10 billion.
Edcon and Absa have further agreed to enter into a long-term, strategic relationship in terms of which Absa will provide retail credit to Edcon customers and Edcon will be responsible for all customer-facing activities, ensuring a seamless experience for customers.
The transaction represents an important component of Edcon’s strategic plan and will facilitate growth, both in South Africa and the rest of Africa, by allowing for a greater focus on core retail operations and providing a more efficient funding structure to grow credit sales. In addition, the transaction follows the path set by leading global retailers to partner with exceptional 3rd party providers for the provision of credit.
Edcon has been focused for several years on improving the performance and attractiveness of the credit book, which is a unique asset with over 3.8 million active accounts and unparalleled customer reach across the full spectrum of consumers in southern Africa. Absa, supported by Barclays, brings both global and local expertise in credit management, along with world-class technology, a strong balance sheet, and the ability to offer a wide range of financial services products and services to Edcon’s customers.
“Edcon is delighted to announce this deal with Absa, which is a natural evolution for Edcon and a key milestone of its strategic plan. This relationship combines our leading retail franchise and marketing excellence with Absa’s exceptional funding strength and sound credit management” said Edcon CEO Jürgen Schreiber. “I am confident that this transaction will help us drive growth in the Edcon retail business.”
Schreiber stressed that credit will remain available across all of Edcon’s retail businesses and that Edcon and Absa will balance continued growth of the credit book with appropriate credit quality.
“Edcon, with the largest retail consumer finance business in the country, will continue to manage all customer-facing activities, including sales and marketing, customer service and collections, thereby ensuring there is no direct service impact on our customers,” Schreiber said. “Absa will oversee retail credit policy, provide funding for the portfolio and work with Edcon to provide customers with a wide range of financial services products.”
“We are delighted to be collaborating with Edcon, which will provide Absa with exceptional customer reach and strengthen our position in the unsecured lending market,” says Maria Ramos, Absa Group Chief Executive.
Edcon’s recently launched Thank U loyalty programme will continue to complement the group’s credit offerings. Edcon’s joint venture through which insurance products are marketed and sold to customers, is not included in the scope of the transaction.
The transaction proceeds will reflect the net book value of the portfolio at the close of the transaction and will be used for the repayment of debt (including notes issued in terms of Edcon’s securitisation programme), investment in the business, and to cover transaction fees and expenses.
The Edcon store card business operates primarily in South Africa (approximately 94% of net receivables as at 31 March 2012), with smaller operations in Botswana, Namibia, Lesotho and Swaziland. The net book value and number of active accounts referenced above refer to the entire portfolio. While it is the intention of Absa (or one of its affiliates) to acquire these portfolios in the neighbouring countries, it is not a condition precedent to the South African transaction.
The transaction is still subject to a number of other conditions precedent, including regulatory approvals. Completion is expected to occur in the second half of 2012.