Truworths acquires Earthchild to boost its kidswear range

South African clothing retailer Truworths International plans to boost its offering to children after completing the purchase of high-end chain Earthchild Clothing for an undisclosed cash sum.
“I am excited by the intended acquisition of the Earthchild and Earthaddict businesses,

which have great growth prospects and which, together with our rapidly expanding LTD Kids business, reinforce our growth prospects in this area of the market,” said Michael Mark, chief executive officer of Truworths.

As announced in a communication issued Tuesday after the market closed, the proposed acquisition of the parent company to Earthchild and Earthaddict brands would add a network of 43 stores to Truworths’ 600 outlets across the country.

“We are committed to providing the necessary financial and other resources to increase the number of Earthchild and Earthaddict stores relatively rapidly, introduce a credit facility for customers and grow the operations beyond South Africa,” Truworths chief executive Michael Mark said in the statement.

Truworths acquires 100 percent of Earthchild for an undisclosed sum

Jonathan Katz, CEO of Earthchild, and Jared Kahn, chief operating and financial officer, will continue in their current roles.

“As one of the founders of the business I am proud to have worked alongside a passionate and capable team, and developed the Earthchild and Earthaddict brands to their well-regarded position in the children’s and ladies apparel market. I look forward to working with Truworths to further expand the footprint of the business,” noted Katz.

The effective date of the acquisition is expected to be in the first quarter of 2015 with key executives of Earthchild to remain in its employ until the conclusion of the three year earn-out period relating to a portion of the purchase consideration.

Both parties have however chosen not to disclose the purchase consideration, which is to be settled in cash. As advised by both companies in a note, the deal is conditional on due diligence and regulatory approvals.

Truworths made its last made an acquisition in 2006, when it bought a controlling stake in local fashion retailer Uzzi for an undisclosed amount. And, despite the company having looked into buying a number of other businesses since then, the owners demanded a higher price than Truworths was willing to pay, Mark said in 2012.

Truworths has a return on equity of about 37 percent, compared with 26 percent and 52 percent at competitors The Foschini Group and Mr Price Group respectively, according to data compiled by Bloomberg.

Earthchild, South Africa’s first retailer to offer organic clothing, specialises in women and children’s fashion and has enjoyed a sustained growth over the past four years.