Johannesburg-based independent specialist retail group Blue Falcon 188 Trading, which owns the popular Studio 88 chain of stores, has secured approval from competition authorities to acquire the struggling John Craig menswear chain from JSE-listed Pepkor.
The Competition Tribunal announced the approval of the transaction on Thursday, saying that the deal will see 422 jobs being saved within the John Craig business.
John Craig is a 73-year-old chain, which has been wholly owned by Pepkor since 2006. It fell under the Pepkor Speciality division in recent years, but late last year Pepkor announced plans to sell the chain amid waning formal menswear sales.
The value of the deal has not been disclosed as Blue Falcon is unlisted and privately owned.
Like Durban-based Retailability, the independent new owner of Edgars, Blue Falcon’s niche retail brands such as Studio 88 have grown significantly in recent years.
Studio 88 has over 270 stores nationwide and its growing presence can now be seen in upmarket shopping centres such as Mall of Africa at Waterfall City.
On its website, it claims to be South Africa’s largest branded fashion clothing and footwear retailer.
“422 jobs will be saved as a result of the large merger whereby Blue Falcon 188 Trading (Pty) Ltd will acquire certain portions and assets of the ‘John Craig’ Business, a division of Pepkor Speciality [the transferring business],” the Competition Tribunal noted in its statement.
“The transaction is taking place against the background of several John Craig store closures and staff retrenchments due to financial difficulties faced by the transferring business,” it added.
The tribunal said it had approved the transaction “subject to public interest-related conditions”. These relate to employment and local procurement concerns.
It stipulated that the 422 remaining employees of John Craig will be transferred to Blue Falcon, in line with the provisions of Section 197 of the Labour Relations Act.
“This excludes certain executives who have concluded ‘opt-out’ agreements and voluntary separation agreements with Pepkor Speciality,” it noted.
Moratorium on retrenchments
“Blue Falcon will not retrench any employees as a result of the merger for a period of two years from the merger’s implementation date,” stated the tribunal.
“In terms of the merger conditions, both Blue Falcon and Pepkor Speciality should give preference to eligible John Craig employees, who lost their jobs as a result of store closures, when new vacancies become available, for a period of two years from the implementation date of the merger.
“Internal vacancies must also be communicated to the affected former employees,” it said.
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“Blue Falcon and Pepkor Speciality must establish a database of the former employees and make this database available within Pepkor Speciality and John Craig for the purpose of availing employment opportunities to them,” it added.
From a local procurement perspective, the Competition Tribunal pointed out that the Department of Trade, Industry and Competition had earlier raised concerns around whether the John Craig chain would maintain the same ratio of procurement of apparel products from South African manufacturers.
“Blue Falcon, as the acquiring firm in this transaction, has therefore agreed to a condition that it will use its best efforts to procure the labels it intends to offer at the John Craig stores from local manufacturers,” it noted.
The Competition Tribunal said the merger parties will be required to provide the Competition Commission with detailed reports annually, for a period of two years, in relation to compliance with the conditions.
In approving the deal, the Competition Tribunal said it found that the merger is “unlikely to substantially prevent or lessen competition in any relevant market in South Africa”.