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Retail Intelligence

Analyst: BWG Deal 'Should Make For A Good Combination'

A leading retail analyst in South Africa has given a broadly positive response to the takeover of 80% of BWG Group by Spar South Africa (SSA), which was announced last week.

Speaking to Retail Intelligence, Michael Treherne of Vestact Asset Management, said that Spar South Africa is currently looking to obtain offshore cash flows, "and for that they would be willing to pay a premium."

He said that SSA's "strong cash flows", coupled with BWG Group's infrastructure "should make for a good combination" and if the "Irish economy picks up like SSA is hoping, the deal looks to have good upside for SSA."

He added that the "real winners" from the deal appear to be BWG Group's main shareholders, Leo Crawford, John Clohisey and John O'Donnell, due to their retaining a "20% stake that they get to sell down the line, at what I am sure will be levels much higher than current value."

Elsewhere, fellow analyst Daniel Isaacs of 36One Asset Management was more reserved in his appraisal, telling The Sunday Times that the debt writedown element of the deal "in and of itself doesn't make it attractive".

In addition, Christoper Gilmour of ABSA Investment Bank told the same paper that the deal is "not quite as good as it initially appeared" for SSA, given the fact that the grocery market in Ireland "is one of the most cut throat in the world, with demand flatlining and capacity expanding."

Last week, SSA chief executive Graham O’Connor said that initial discussions between the company and BWG Group, which gave rise to the current deal, commenced in March.

© 2014 - Checkout Magazine by Stephen Wynne-Jones

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