Country Road has agreed to buy rival fashion retailer Witchery and accessories brand Mimco, in a move which it believes will lead to lower prices for shoppers.
The $172 million takeover, which had been the subject of speculation for months, comes more than a year after Gresham Private Equity began looking for a buyer for Witchery and Mimco.
Gresham bought Witchery and Mimco in 2006, but decided to sell the fashion brands after dumping plans for a stock market float in 2011.
Country Road chairman Ian Moir said he believed the acquisition would give the retailer greater bargaining power with suppliers, meaning it would be able to source its fashions at cheaper prices and then cut pricetags for shoppers.
He also expected Country Road to cut costs by $10 million in the next couple of years by sharing systems and websites for the three fashion brands.
"What makes a brand more accessible is reducing prices," he said.
"What will allow us to do that is we're creating a business of size so when we go into suppliers and negotiate price and terms and commitment and preparedness to hold stock and take risk then we're really talking from a position of much more authority."
Mr Moir said Country Road, Witchery and Mimco would remain as separate brands and while he was unsure at this stage what this would mean for jobs he hoped to ultimately create more positions.
"We see ourselves as really growing this business so we see the opportunity to grow jobs," he said.
Witchery has been operating in Australia for 40 years and offers women's, men's and children's clothing and accessories.
It has 210 stores across Australia, New Zealand, South Africa and Singapore.
The Mimco brand includes handbags and jewellery and has 96 stores in Australia, New Zealand, Singapore and England.
On completion of the acquisition, current Country Road chief executive Howard Goldberg will leave the company and be replaced by Witchery chief executive Ian Nairn.
Mr Moir said Mr Nairn's appointment was not a condition of the sale and it was difficult to chose between him and Mr Goldberg.
Fat Prophets analyst Greg Fraser said he believed the current climate in the Australian retail sector made it possible for Country Road to acquire Witchery at a good price.
He also agreed that the larger scale of the businesses after the acquisition would help cut costs.
The acquisition will be partly funded by through a one-for-two pro-rata renounceable rights issue at $2.66 per share to raise $92 million.
Country Road's 88 per cent shareholder, South Africa's Woolworths Holdings, has said it will participate in its pro-rata share of the entitlement.
Country Road expects to finalise its acquisition of Witchery and Mimco in October.
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