You can tell just how fragile Spar’s situation is when news of the acquisition of a mere 1.62% of the company’s shares was sufficient to bump the price up 6.44% in morning trade on Monday.
Of course, it was significant that Peresec Prime Brokers was the buyer and now holds 10.45% of Spar. That smacks of a potential control bid, or perhaps someone trying to build up a position of influence.
The market is awash with rumour and speculation, but until early November, when the new chair and additional non-executive directors will be identified, there’s little of substance. So it’s no wonder analysts are reluctant to talk at this juncture.
Top of the list of unknowns is for whom Peresec is buying. Chances are it’s A² Investment Partners, which has previously worked with Peresec when it has wanted to take control of a floundering company — think Novus, Nampak and York. But Peresec has also worked with Value Capital Partners, which might be interested in Spar as a turnaround. Indeed, Peresec has relationships with a host of parties that could be looking at Spar.
And then there’s Phil Roux. The Roux of Nampak recovery fame has been touted as a possible Spar chair, although some reckon he would be put to more effective use as CEO. Roux, who has the backing of the powerful independent retailers, has previously worked closely with A².
Decisive leadership?
Given the lack of facts available, it can only be the hope that something decisive will be done on the leadership front that is giving life to the share price. There was certainly nothing in the recent trading update to justify any recovery in Spar’s stock.
While last week’s update disclosed the excellent news that Spar management and its crucial independent retailers now appear to be working well together, it painted an overall picture of a company in dire straits. (With all that’s happened in recent months, any other picture would have been misleading.)
Financial 2026 is expected to underperform financial 2025, already a dismal performance. Turnover in 2025 rose a nominal 1.6% and operating profit edged up just 2.3% which means the retailer is just about ticking over.
And then there’s the debt situation. “While overall debt levels have reduced, elevated ECL [expected credit loss] provisions and other impacts have increased pressure on earnings in Southern Africa,” said the board in its trading update. The increasing ECL provisions (for the debt owed by independent retailers to Spar) are particularly troubling, illustrating the growing difficulties being faced by Spar’s independent store owners.
Over in Ireland, BWG is reported to have delivered consistent growth in local currency. Nothing exciting there, given that BWG’s growth in 2025 wasn’t much better than that achieved in Southern Africa.
Irish offramp?
The board said the group still expects to meet the revised covenant limits agreed with its lenders. Again, that doesn’t sound hugely comforting, as it suggests the possibility of not meeting those limits.
Inevitably, given the grim debt situation, the mix of rumour and speculation includes whispers of the Irish business being sold off.
This is a possibility, but given BWG’s uninspiring performance, it’s difficult to think of a likely buyer. Certainly, the company is in a much stronger position now than it was in 2014, when then Spar CEO Graham O’Connor swept in to rescue it from likely liquidation. Smack in the middle of the eurozone crisis, the Irish banks were calling in loans all over the country. BWG was in the firing line; its debt had ballooned on the back of a highly geared management buyout a few years earlier as well as ill-timed property purchases.
It’s almost impossible to think of a buyer who would be prepared to pay the sort of money O’Connor handed over in early 2021 to wrap up the deal — R1bn for all of 10%.
