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Both JD Group and Steinhoff International still have an eye on expanding their retail footprints in the growing European market, despite the failed merger between the two.

May 31, 2007

By Tom Robbins

Cape Town – Both JD Group and Steinhoff International still have an eye on expanding their retail footprints in the growing European market, despite the failed merger between the two.

JD Group executive chairman David Sussman said yesterday that the retailer’s plan to extend its European reach would “take that much longer” after the failure of the deal.

Steinhoff, which has significant furniture making interests in Europe, was more circumspect, but said it would consider expanding its vertically integrated furniture retail business on the continent.

Steinhoff group services director Piet Ferreira would not comment on whether this could include acquiring Abra, JD Group’s furniture retail chain in Poland.

Ferreira did say the relationship between the personalities at the two companies had not been affected, and they remained “good friends”.

Steinhoff has supplied furniture to JD Group in the local market for years. The two companies have a similar relationship in Europe, with Steinhoff a supplier to Abra.

Ferreira said Steinhoff’s UK competitors were all vertically integrated, which was the only way to remain competitive. Steinhoff owns the Homestyle furniture retail chain in the UK and the Quattro Mobili chain in Hungary.

Sussman said JD Group had never explored the possibility of doing an exclusively European deal with Steinhoff. For now it was focusing on managing the negative shift in the local credit cycle.

Ferreira said there were opportunities not only in the emerging markets of central Europe but also in established markets, such as the UK and Germany.

Since Poland and Hungary had joined the EU, he said, significant labour migration to cities such as London meant Polish immigrants had newfound disposable income.

On top of this, there was healthy growth in consumer markets such as Germany for the first time in many years.

One analyst said it was possible that JD Group would buy Quattro Mobili, or that Steinhoff would buy Abra. He did not think they would embark on a joint venture and emphasised that Steinhoff’s retail ambitions lay primarily in established EU economies like Germany and France.

Ferreira confirmed that Steinhoff’s sale of its local furniture making business to a private equity consortium would go ahead.