Kalahari, Takealot to merge
Mega-merger, which is subject to approval by the competition authorities, will create an e-commerce powerhouse in South Africa under the Takealot brand. By Duncan McLeod.
Two of South Africa’s largest online retailers — and longstanding adversaries — have agreed to merge.
The value of the deal has not been disclosed. Under the deal, Naspers will acquire shares from Tiger Global such that the two companies have an equal shareholding in the merged business. They will each hold about 41% of the equity.
The proposed merger is subject to Competition Commission approval and will only become effective once the commission has ruled, the companies said in a joint statement.
The businesses will continue to trade separately and service their customers as usual through the festive season, they said.
“The move was driven by the fact that, without scale, South African e-retailers simply can’t compete successfully against the local brick-and-mortar retailers and foreign companies such as Amazon and Alibaba,” the companies said in the statement.
“After many years of losses on Kalahari and four years [of losses] on Takealot, we realise we have to work together if we are to survive and prosper,” said Oliver Rippel, senior executive responsible for Kalahari.
“If you also take into account an uneven playing field against foreign operators who do not pay tax in South Africa, and the fact that high broadband costs are impeding the speed of growth in local online shoppers, combining forces gives us a better chance of success.”
The companies said online retail accounts for only 1,3% of the total market for consumer goods in South Africa. “The channel has great upside potential when one considers that in developed markets like the US and the UK online retail accounts for as much as 14% of total retail of consumer goods.”
“We are very excited about this transaction and the efficiencies and scale that it can generate for the merged business. We will continue to make sure that our primary focus is on the customers of the merged entity as they are the life blood of our business,” said Takealot CEO Kim Reid.
Reid will manage the merged entity under the Takealot brand together with co-CEO and chief technology officer Willem van Biljon.
Van Biljon, who co-founded Mosaic Software and who was one of the leaders who built Amazon’s EC2 cloud service, joined Takealot in June.
The deal with Kalahari comes just six week after Takealot announced it had acquired 100% of the equity of Superbalist.com, a design and apparel online retailer founded four years ago. According to Takealot, the acquisition would allow it to target “millennials”.
In May, Takealot said it had raised $100m from Tiger Global management and revealed plans to play a much more aggressive role in South African e-commerce.
“We have agreed on the capital expansion and the money has been raised and we are now funded to grow as we choose,” CEO Kim Reid told TechCentral in an interview at the time. Tiger Capital took control of Takealot, then Take2, in 2011.
Reid said Takealot had enjoyed growth in excess of 100%/year and wanted to “increase that growth rate”.
“If you look at the size of the market right now, there is a R550bn opportunity in which e-commerce is only just beginning to play a role,” he said. — © 2014 NewsCentral Media