Pepkor has pushed back against claims by rival Lewis that its proposed R3.2bn acquisition of Shoprite’s furniture division would leave it controlling more than half of SA’s furniture retail market.
This comes after Lewis approached the Constitutional Court in a last-ditch attempt to stop the merger, arguing that combining Pepkor’s furniture operations with Shoprite’s OK Furniture and House & Home chains would give the enlarged group “more than 50%” of the market and squeeze out smaller retailers. But Pepkor said the allegation relied on a flawed and overly narrow view of the industry.
“We believe that Lewis’s definition of the market is narrow. They are focusing only on the high credit base retailers,” Pepkor COO Sean Cardinaal told investors during the group’s annual results presentation on Tuesday.
“If you look at our business, we have a credit participation of 13% and a much wider definition of the market, which we believe drops us well below the 50% they refer to. We think that’s borne out considering that the competition appeal court found in our favour, and we believe that backs up our argument.”
The Competition Commission recommended the merger to the Competition Tribunal in April, subject to conditions that jobs be preserved and local furniture procurement increased. Lewis sought to intervene in the tribunal’s hearings, arguing it could offer critical input on antitrust concerns, but the competition appeal court dismissed its application last month.
Despite the setback, Lewis CEO Johan Enslin has vowed to continue fighting the transaction, saying the merger would weaken smaller competitors, strain supplier relationships and make it harder for new players to enter the market.
“We believe this merger will not be good for the supply base, it won’t be good for smaller retailers in the market, and it will block new potential entrants. If the merger goes ahead, Pepkor could own more than 50% of the furniture retail market. That cannot be healthy for competition,” he recently told Business Day.
Pepkor’s planned acquisition includes more than 400 Shoprite-owned furniture stores across South Africa, Botswana, Lesotho, Namibia, Eswatini and Zambia, making it one of the largest retail deals in the sector in a decade.
Pepkor said the acquisition of Shoprite’s OK Furniture and House & Home chains formed a key part of its home expansion strategy, adding scale in the furniture, bedding and appliances market. The group confirmed that the non-South African part of the transaction was implemented on October 1.
Lewis has already filed its papers with the Constitutional Court and will soon submit heads of argument. The court will decide whether the group may proceed with its challenge.
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