Mr Price in hot water for R10 billion European gamble

South African retail giant Mr Price has come under fire from shareholders regarding its proposed acquisition of German-based NKD Group for nearly R10 billion.

Shareholders’ concerns range from the viability of a European expansion to the financial performance of the acquisition target.

Despite this pushback, Mr Price is sticking to its guns and standing by the strategic rationale behind the purchase.

Mr Price is one of South Africa’s biggest apparel retailers, known for brands like Miladys, Sheet Street, Yuppiechef, Mr Price Home, and Studio 88.

While the group operates predominantly in South Africa, it also has operations in the rest of Africa.

This means that the retailer’s proposed acquisition of NKD marks Mr Price’s expansion into a new market, specifically Central and Eastern Europe.

Mr Price announced its plans to acquire NKD on 10 December 2025, saying the business has identified significant growth opportunities across its seven existing markets and has the appetite to pursue long-term sustainable growth across the continent.

NKD was founded 60 years ago as a cash-based European value apparel and homeware retailer headquartered in Germany.

It operates 2,108 stores across seven Central and Eastern European countries, including Germany, Austria, Italy, Croatia, Slovenia, the Czech Republic and Poland.

Pegasus Group Holding is NKD’s retail unit, and the proposed transaction will see Mr Price acquire 100% of Pegasus’ shares for around €487 million (around R9.7 billion at the time it was announced).

Following this announcement, Mr Price’s share price plunged, losing as much as 12% on the day.

This was, in part, attributed to the value of the transaction, as R9 billion constitutes a notable proportion of Mr Price’s share price, which stood at around R50 billion at the time.

In the weeks that followed, notable Mr Price shareholders voiced their concerns about the transaction, asking for further clarification regarding the rationale behind the purchase.

Mr Price responded to these concerns in a follow-up announcement to shareholders, wherein it reaffirmed the strategic rationale for the transaction and the detailed due diligence process undertaken.

However, the retailer noted that there were information disclosure constraints in place.

“Management and the board of directors remain excited about the opportunity that NKD presents to the Mr Price Group and look forward to sharing further insights in due course,” it said.

Shareholders speak out

One of the most notable Mr Price shareholders to publicly voice their concerns was 36ONE Asset Management.

On 11 December 2025, 36ONE shared a letter via social media that it had written to Mr Price’s board outlining its concerns.

One of 36ONE’s main concerns related to NKD’s financial viability and poor historical financial performance.

The asset manager pointed out that, between 2020 and 2023, NKD posted negative profits after tax for consecutive years, with net losses reaching as high as €28.4 million (R541.66 million) in 2023.

While this situation improved in 2024 and 2025, 36ONE said this turnaround only saw modest revenue growth and speculated that it was driven by accounting adjustments rather than sustainable operational improvements.

Furthermore, 36ONE said the proposed transaction raised several “red flags” similar to those seen in offshore expansions from South African retailers that had failed, like Woolworths’ David Jones blunder.

These “red flags” included a high valuation, the company’s plans to fund the acquisition through debt, and concerns that the retailer had underestimated the capital expenditure required to refurbish NKD’s estate and integrate it into Mr Price.

Other social media commentators have also pointed out that Mr Price CEO Mark Blair previously dismissed the idea of an international expansion.

In 2019, Blair told analysts at a results presentation that to build a brand in a foreign market is “a very long road, and you got to have some deep pockets”.

He added that Mr Price’s biggest opportunities remain in its home market of South Africa, where the retailer knows its customers and competition.

36ONE further criticised Mr Price’s board for the handling of the announcement and an apparent lack of shareholder engagement.

In its announcement of the proposed acquisition, Mr Price explained that the deal constitutes a Category 2 transaction and, therefore, does not require shareholder approval.

However, 36ONE claimed that the board is using this technicality to avoid meaningful consultation, despite clear shareholder disapproval, as shown by the share price plunge following the announcement.

More shareholder concerns

Another major South African asset manager, Benguela Global Fund Managers, has also written to the JSE and Mr Price’s management regarding the proposed transaction.

In its letter to the board, dated 8 January 2026, Benguala shared many similar concerns to 36ONE, and urged the company to abandon what it describes as a “speculative turnaround bet”.

The fund manager compared the proposed transaction to previous failed expansion attempts by South African retailers into the so-called “European graveyard” and other foreign markets.

Some examples Benguela pointed to include Truworths’ acquisition of Office in the United Kingdom (UK), Brait’s UK-based New Look, and Woolworths’ David Jones in Australia.

In Benguela’s letter to the JSE, dated 22 December 2025, the fund manager formally requested that the exchange reclassify the NKD deal as a Category 1 transaction by aggregating this acquisition with previous deals.

Unlike a Category 2 transaction, a Category 1 deal would force Mr Price to attain shareholder approval.

To support its argument for reclassification, Benguela argued that, since 2021, Mr Price has moved away from its core principal activities.

These activities, the fund manager argued, were historically private-label, mid-value fashion and homeware in Southern Africa.

However, it said recent acquisitions have introduced sectors where Mr Price had no prior material involvement.

This includes the proposed NKD deal, South African kitchen and homeware retailer Yuppiechef, local deep-discount retailer Power Fashion, and aspirational urban streetwear brand Studio88.

Benguela pointed out that all of these deals represent an investment of over R17.6 billion and fundamentally changed Mr Price’s risk and operational profile.

The fund manager said the JSE’s Listing Requirements mandate aggregation because all these acquisitions are strategically linked and constitute more than 30% of Mr Price’s market capitalisation, the threshold for a Category 1 transaction.

Mr Price’s rationale

Daily Investor reached out to Mr Price regarding this acquisition and shareholder concerns. The retailer said it is aware that, following the JSE’s response to Benguela, the transaction has been appropriately categorised, with which it agrees.

“Benguela has referred the matter to the Financial Services Tribunal. The matter is now before the Tribunal, and we will make written submissions as part of the formal process,” Mr Price told Daily Investor.

“We have signed the acquisition agreements and are contractually obliged to comply with the terms thereof.”

In its announcement of the deal, Mr Price explained that NKD has a clearly differentiated value positioning, targeting quality and price-conscious customers, with a predominantly private label range offering that serves the whole family and carries minimal fashion risk.

The retailer compared it to Mr Price’s positioning in its current markets, with the company operating as a cash-based, omni-channel business focused on providing fashion and homeware offerings.

However, unlike Mr Price, NKD operates smaller-format stores with an average store size of 300 m². 

This model is enabled by reduced rental costs in smaller town locations and a lean approach to capital expenditure, labour and logistics.

Mr Price told shareholders that NKD’s management team consists of highly seasoned retailers with a strong track record and a business culture that aligns with the South African retailer.

The retailer said market data indicates that the growth in the value retail market is outpacing that of the global total retail market, which aligns with the group’s value-focused operating model. 

It found that, in Europe, value retailing is growing at a significantly higher rate than the total market and now accounts for around 22% of the total retail market.

Therefore, according to the company, NKD represents an opportunity that is strategically aligned with the Mr Price Group.

“We have spent a considerable amount of time researching markets and assessing opportunities,” Blair said. 

“We have been guided by our strict investment criteria, which has given us clarity on our next phase of growth and enabled us to move quickly past opportunities that did not fit within our parameters.”

“After meeting the NKD team, it was evident that this was the right business to pursue. Like us, they are value retailers at heart and have a very clear understanding of who their customer is and how to best serve them.”