Northstar’s Clayton joins Cy Jacobs, fires broadside at Mr Price over “tragic” NKD deal

Key topics:Northstar slams Mr Price over risky NKD acquisition, share drops 17%NKD seen as outside Mr Price’s expertise, weak financials raise concernsExecutive incentives may drive poor decisions, investors demand clarity.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..BizNews Reporter.There is an adage in the investment world, famously coined by the Oracle of Omaha, Warren Buffett: "It takes 20 years to build a reputation and five minutes to ruin it". It is a quote from a blistering open letter from Northstar Asset Management’s founder and CIO, Adrian Clayton, to the management of Mr Price Group, and comes hard on the heels of similar concerns expressed late last week by 36ONE’s Cy Jacobs. Clayton’s missive, embedded herewith, articulates what the market has already signalled in a 17% drop in Mr Price's share price — shareholders are deeply unhappy with the retailer’s proposed acquisition of the NKD Group.For years, Mr Price has been the darling of the JSE retail sector. Clayton describes it as a business defined by a "clear and disciplined strategy," serving a fashion-conscious, young market through an efficient supply chain and — crucially — a history of cash-based rather than credit-based retail. Although he describes the company as having a "lazy” balance sheet, that was offset by its attractive conservatism. But the announcement of the NKD acquisition has, in Northstar’s view, muddied this clear water..Read more:.Cy Jacobs joins Piet Viljoen - calls time on Mr Price’s R9.7bn German gamble.The market’s verdict was swift and brutal. Clayton notes that between Tuesday, 9 December and Thursday, 11 December 2025, Mr Price’s stock fell from R211 to R175. That is a market capitalisation loss of R9.2bn in roughly 48 hours—a figure Clayton notes is "not far off the stated purchase price" of the acquisition itself.The concerns raised by Northstar are fundamental. They argue that NKD falls squarely outside Mr Price’s core competency and is in a jurisdiction where the South African management team has no operating experience. The financials, based on the limited data provided, look ominous. While Mr Price enjoys profit after tax margins of 9.4%, NKD sits at a razor-thin 1.9%. Furthermore, while Mr Price has compounded revenue at 11.6% over the last six years, NKD has trudged along at 3.2%.Perhaps most damning is Clayton’s reference to the "graveyard of SA retailers" that have destroyed shareholder wealth by acquiring businesses in developed markets. South African investors suffer from PTSD regarding offshore retail adventures—one need only look at Woolworths and David Jones or Truworths and Office. Clayton fears Mr Price has "deviated from [its] tried and tested approach" to join this ignominious club.Northstar also raises the prickly issue of executive incentives. Clayton notes that the CEO has a 75% weighting of short-term incentives tied to HEPS growth and to share awards tied to sales growth. The asset manager warns that heavy weightings on revenue and EPS growth often "lead management teams to allocate capital poorly" and drive bad acquisitions.The letter concludes with a demand for answers. Northstar is requesting a detailed explanation of the valuation framework, the strategic fit, and NKD's future capital requirements. As it stands, Clayton views the move as "tragic considering [management’s] impeccable stewardship" since 2006..Read more:.Mr Price shares dive over pricey NKD expansion.Mr Price has been an easy business to value, historically trading at a normalised P/E of 11 to 16 times. But with the share price crashing to a P/E of 11.7x post-announcement, the market is pricing in a disaster. Unless management can provide the "proper colour" and transparency Clayton demands, the reputational damage Buffett warned of may already be done..Download and read the open letter to Mr Price in full below:

Northstar’s Clayton joins Cy Jacobs, fires broadside at Mr Price over “tragic” NKD deal

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