Investors in TFG have had no qualms about stumping up cash to support the retailer’s bookbuild. The retailer, which owns brands such as Foschini, now has an extra R500m after its overnight offer was more than three times oversubscribed.

TFG initially planned to raise R2bn in fresh equity to fund its acquisition of Australia’s Retail Apparel Group and TFG chief financial officer Anthony Thunstrom said it could have gone for more, were it not for the resulting share dilution.

The shares were priced at R145 — a 0.9% premium to the stock’s 30-day weighted average. Thunstrom said the market "is always inherently sceptical" of Australia as a destination and investors initially had "mixed feelings" about its latest overseas purchase, but added, "we have gone to quite a lot of length to explain the rationale of the transaction".

Thunstrom described the Retail Apparel Group as a "mini-TFG" and said the company had "outperformed almost any other retail brand in Australia over the last four years by a significant margin. We see a lot of growth long term."

RAG has posted compound annual sales growth of 14.3% over the past three years and at the time of the deal, TFG said it would be earnings accretive for the 2018 financial year. RAG is the largest specialist menswear retailer in Australia. It recently branched out into womens active wear through the Rockwear brand.

Initial scepticism is understandable given Woolworths’ recent wobble in the Antipodes and a downturn in the Australian retail sector that saw Topshop’s Australian franchise seek voluntary administration earlier in 2017. But Thunstrom said Australia was not "as tough as SA".

TFG raised a A$40m ($31.96m) debt facility to finance the deal and said the extra money raised from the bookbuild meant a lower level of net debt to ebitda (earnings before interest, tax depreciation and amortisation) at 1.6 times.


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