Furniture retailer JD Group has notified the Connection Group board of its firm intention to acquire the company for about R500 million.
The companies say in a statement issued this morning that JD plans to buy the entire issued ordinary share capital of Connection by way of a scheme of arrangement.
The offer amounts to R14.75 a share, which the companies say represents a premium to the closing price of the Connection share on 13 July - the final trading day before Connection issued a related cautionary notice.
On Friday the Connection share closed at R13, down 20c or 1.5% from Thursday. However, by late this morning, it had risen by R1.50 to trade at R14.50.
The groups say shareholders owning about 58% of the issued shares in Connection have indicated their firm intention to support the scheme.
Should the deal go through, Connection Group will be delisted from the JSE and become a wholly owned JD Group subsidiary.
However, it will continue to focus on its market segment with its own brand identity, merchandise range and market profile, they add.
Connection says it has appointed Investec Bank as an independent advisor to determine whether the terms and conditions of the deal are fair and reasonable to the group`s shareholders.
"Investec`s opinion and the recommendation of the Connection board will be communicated to the Connection shareholders in due course," it adds.
Connection Group, founded in 1989 and listed on the JSE in 1997, is a holding company with operations in the software and hardware retail sector as well as digital photography. Its brands include Incredible Connection and Photo Connection.
For the year to August 2004, the group achieved revenue of R790.93 million and headline earnings of 92.2c a share.
JD Group, a furniture, appliances and consumer finance products provider, achieved revenue of R9.06 billion for the same period. Headline earnings per share amounted to 522.0c.
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