This acquisition marks the completion of the vertical integration business model which has been the Company’s previously stated intention and provides additional outlets for the sales of our own products, through the entire “Farm to Fork” process, allowing the Company to access the expanding potential of the emerging African consumer market.
Obtala has agreed terms and signed an Agreement with Lifes’ Comfort Solution (Pty) limited, a private, non-related Lesotho registered entity to acquire a majority 72.69% controlling shareholding and management control over five retail outlets.
Business Background and Strategy
The Business operates out of five separate rented retail units located predominately within the southern lowlands of Lesotho. The main branch and administrative centre is located in Maseru, the capital of Lesotho and has a shop floor area of 2,940m2 (31,650 square foot). The total floor space for the five units is 5,590m2 (60,200 square foot), which are all fully stocked. This adds to the 1,000m2 (10,750 square foot) premises the Company has secured through a rental agreement in Bloemfontein, South Africa. The Business has recently installed a new IT system for stock and inventory control across the chain and employs 135 staff, including senior management, buyers, accountants, marketing staff and shop workers.
The Business is a departmental store with a variety of well-known home focused branded goods and has been in operation for over 10 years having built a well-respected brand name within the Kingdom of Lesotho. It has commission based agreements with Vodacom, selling air-time, with Mpesa, the money transfer business, and with Multi-Choice, the satellite TV provider all of which increase the footfall into the shops, which is currently estimated by the Vendors at 40,000-50,000 consumers per month.
The business currently sources products from wholesalers in South Africa resulting in reduced gross profit earnings opportunities and missed uplift potential that can be achieved by sourcing elsewhere. The Company has contacted two buying companies in Asia with the intention that they will purchase and consolidate freight on our behalf before shipping into Africa. The Company will open an Asia based buying office that will service Lesotho and the African Homes Stores which will be opened in other African countries over the next two years. The stores provide an outlet for our own goods and products which will be sold in specially designated Mama Jo’s “Deli” style sections within each store.
The Company has engaged the services of an experienced manager with strong African experience to oversee the operations and the planned African Home Store expansion into neighbouring countries. As the business expands the Company will engage suitable top level management to supervise the growth of the business.