Mr Price deal slammed

SERIOUS CONCERNS: TOP SHAREHOLDER FLAGS RISKS IN R9.7BN NKD DEAL

- Hilton Tarrant

SALIENT POINT. Was 'accelerated investment in core SA formats' considered as a capital allocation alternative? Picture: Bloomberg

(Bloomberg)

One of the country's top asset managers, 36One, with more than R36 billion in management at its retail unit trusts and nearly R16 billion at its three hedge funds has, in an open letter, slammed the board of Mr Price over its R9.66 billion acquisition of German value retailer NKD.

In a 1 500-word document, 36One co-founder Cy Jacobs seeks to “register serious concerns regarding the proposed acquisition of NKD” and requests “a structured engagement with the board on this matter”.

Jacobs argues that “the immediate share price reaction to the announcement - a double-digit one-day decline - strongly indicates that a significant portion of the market is sceptical of the deal’s value proposition and risk profile”.

Mr Price Group shares closed 16% lower last Thursday when it announced the deal.

Jacobs said bluntly that “South African retailers have a terrible history of value destructive offshore acquisitions”.

“The worst of these deals share the following characteristics: overvalued, debt-financed, significant size relative to the acquirer’s market capitalisation, underestimating future capex requirements, limited understanding of local markets and competitive dynamics and acquiring assets with poor returns on capital.