Edcon and Absa Bank Limited ("Absa Bank" or "Absa") agree terms for sale of Edcon's private label store card portfolio
06 June 2012
Edcon is pleased to announce that it has entered into agreement with Absa Bank, a member of Barclays, for it to acquire the accounts and receivables relating to the private label store cards of Edcon (the “Card Portfolio”) (the “Acquisition”).
Edcon and Absa Bank have further agreed to enter into a long-term, strategic relationship under which Absa Bank will provide retail credit to Edcon customers and Edcon will be responsible for all customer facing activities (the “Program”).
Absa Bank will acquire the Card Portfolio for a cash consideration equal to the net book value of the Card Portfolio receivables at the effective date of the Acquisition. Absa Bank and Edcon expect the purchase price of the Card Portfolio to be approximately R10 billion. The transaction is expected to close in the second half of 2012.
In terms of the Program, Absa Bank will have responsibility for credit, management of fraud, risk, finance, legal and compliance operations of the store card business, while Edcon will retain all customerfacing activities, including sales and marketing, customer services and collections. This should ensure a seamless customer experience. Edcon and Absa will balance continued growth of the credit book with appropriate credit quality.
The transaction is a natural evolution for the business and a key milestone in its strategic plan. Moreover, it is attractive to Edcon as it will (i) leverage the core competencies of both Edcon and Absa (ii) facilitate growth in retail, including growth in credit sales (iii) immediately improve Edcon’s balance sheet; and (iv) allow Edcon to focus on and fund growth in its core business activities.
The Edcon store card business operates primarily in South Africa (approximately 94% of net receivables at 31 March 2012), with smaller operations in Botswana, Namibia, Lesotho and Swaziland. While it is the intention of Absa Bank (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 Acquisition and the Program are subject to a number of conditions precedent customary for a transaction of this nature, which include, but are not limited to, the obtaining of regulatory approval for the Acquisition and/or the Program, as required, and the release of security interests over the Card Portfolio assets under Edcon’s various existing notes and funding structures.
On behalf of: Edcon Further info: Mark Bower, Deputy CEO, Edcon +27 11 495-6411 Email: email@example.com or Debbie Millar, Executive Investor Relations and Media, Edcon +27 11 495 4086 Email: firstname.lastname@example.org
6 June 2012
Debt Sponsor Rand Merchant Bank (A division of FirstRand Bank Limited) Legal advisors to Edcon: Sidley Austin LLP (USA) Kirkland and Ellis (UK) Werksmans Attorneys
Financial advisors to Edcon: J.P .Morgan First Annapolis (USA)