CNA gets a new lease on life - literally

In a deal valued at not much more than a rand and structured as a sale of stock, fixtures and brands, CNA has been sold to Astoria Investments, which for its part takes on board the troubled retailer's employees, store leases and stock - but no trade creditors or any debt.

Several long-standing retailers - including Exclusive Books, PNA and Bidvest (which owns Waltons) - looked at CNA, but did not pursue the business.

In a deal similar to the legendary purchase by Shoprite of OK Bazaars for R1 in 1997, all 167 CNA stores have been sold to JSE-listed Astoria Investments, which is majority owned by investment company RECM and Calibre.

CNA, one of the SA's oldest brands, was bought by Edcon for R141m in 2002. With this deal, Edcon's restructuring - and the sale of all of its noncore businesses - are now complete.

CNA dates back to 1896. PNA, a franchise group that opened in 1992, already has about half as many stores as CNA.

Chantelle Fritz, marketing manager of PNA, says the business will open more stores this year, with a few confirmed over the next few months, in Witbank, Nelspruit and Brakpan. PNA currently has 85 stores in eight provinces and will continue to aggressively expand its footprint. She says PNA differs from CNA as it already specialises in stationery, art and craft supplies and educational books.

Former Exclusive Books CEO Benjamin Trisk drove the CNA deal and will run the business. He wanted to buy CNA for close to two years, and approached Jan van Niekerk, a director of Astoria, about the prospect.

Van Niekerk says CNA is a very specific and special business. "It survived world wars, the Great Depression, oil price shocks and various political regimes. It's a strong brand and has a place in society."

He says Trisk will be responsible for the retail side and "we will help him with capital allocation decisions. CNA as a stand-alone business needs focused management.

"It has a strong book division that has probably shrunk a bit smaller than it should be. Of the core product lines, the magazines are probably under the most pressure. One of the main attractions of CNA is its footprint throughout SA, as in many towns it's the only place you can buy books and paper."

Van Niekerk says in rural areas there are often no competitors to the local CNA, so they have a very big role to play.

"Obviously in urban areas there's competition from online retailers. The parts where CNA is struggling to compete is in electronics, and I don't think that's where they should compete going forward."

The only changes that might need to take place could be moving some of the stores to more attractive locations, he says.

"We're not planning to close stores as we don't have to. We think CNA has a future."

Astoria Investments will hold 60% of the business while Trisk and management will hold 40%.

Trisk says children's books are a big and growing market, as are African fiction, stationery, back-to-school and office supplies.

Trisk is well known in the publishing world as the former head of Exclusive Books, and is credited by some with saving the book-selling industry in SA.

But he left the chain in 2018 after an acrimonious fight with its board, with Business Day reporting at the time that Trisk had been suspended by the board pending the outcome of a disciplinary inquiry.

When he left, flagship stores had been overcapitalised, and many of the stores were loss-making. Some say the group itself was making a loss. Trisk is emphatic that it was profitable when he left.

In terms of CNA, Trisk says the business needs to be run differently. CNA will have four pillars: books; stationery; cards and gifts; and the newsstand. "We need to make it more exciting, to have a real focus on literacy and education," he says.

The Central News Agency was started by two entrepreneurs to sell newspapers on the dusty streets of Johannesburg in the 19th century. It was listed on the JSE in 1903, grew extensively from 1961 to 1975 and between 1987 and 1997, with many ownership and management changes taking place.

But by 1997 CNA was unprofitable and was sold by the Gallo group to WoolTru. In 2000 it was sold to Edcon, and initially regained profitability until Edcon was bought by Bain Capital in 2007. Trading conditions, lack of focus and group debt made this a difficult time for CNA.

Commenting on the sale of CNA, Edcon CEO Grant Pattison says the criteria for a suitable buyer include preserving all stores and jobs, financial backing, and a management team that can run it.

Pattison says some parties offered to buy 50 or 60 stores, but that didn't fit the bill.

"The deal is they have paid for the stock and they take over the liabilities of employee contracts and stores," he says.

Last year Edcon secured a R2.7bn lifeline deal with landlords, the Public Investment Corporation and creditors. It's been selling off noncore assets and shrinking its store portfolio.

As for Edcon's performance, Pattison says the restructuring is on track but pressure remains on sales given the weak economy.

"October and November were tough and Christmas and back-to-school were good. Cash and turnover is tight. Now the focus is on initiatives that drive sales in Edgars and Jet."

Pattison says they've found a good home for CNA where it has a better balance sheet and more capital. He says Edcon was a drag on CNA, especially since Edcon needed rent reductions from landlords, which led to CNA being kicked out of some shopping centres.