JOHANNESBURG (Reuters) - South African fashion retailer Truworths International (J:TRUJ) said on Monday it was in talks with privately owned shoe chain Office about acquiring the British company.
Though the South African retailer has clothing stores in Ghana, Nigeria and Botswana, it makes the bulk of its profits and sales in its home market where consumer purchasing power is being reined in by rapidly increasing energy costs and rising interest rates.
Office, a footwear retailer with 150 stores, would be Truworths' first foray into Europe.
The South African retailer could be willing to pay 300 million pounds ($462 million) for Office, Britain's The Sunday Times reported, citing unnamed advisors as sources.
"No binding offer has been made, neither has any transaction been concluded with Office or its shareholders," Truworths said in a statement.
South African rival The Foschini Group (J:TFGJ) last year bought Britain's Phase Eight clothing retailer, giving it access to European markets.
Truworths is looking at opportunities outside South Africa, which could include in the northern hemisphere, Truworths Chief Executive Michael Mark told Reuters last month.
The company has been hardest hit by the entry of foreign retailers such as Australia's Cotton On and Inditex's Zara (MC:ITX) to the South African market, said Chris Gilmour, an investment analyst at Absa Wealth.
Buying Office, which sells men's, women's and sports footwear in a mid-level price range, would help it diversify away from its home market, but the shoe retailer has "a bit of debt attached to it," said Gilmour.
Truworths sells about 70 percent of its products on in-store credit cards.
Gilmour said it might expose itself further to the effect of rising interest rates as he said Office's long-term debt stood at 127 million pounds, citing a report by Barclays (LONDON:BARC).
Shares in Truworths, which have gained 15 percent this year, rallied more than 4 percent after the company's statement, but paired gains and were up 2.2 percent by 1315 GMT.