Pick n Pay has obtained shareholder approval for its recent rights offer, attracting R8.2bn in subscriptions or more than double its initial R4bn target.
This support indicates investor confidence in the group’s ambitious turnaround strategy spearheaded by newly reinstated CEO Sean Summers. Pick n Pay said this ensured sufficient funds. About 98.7% of shareholders participated.
Pick n Pay has a debt burden of more than R6.2bn. It said the rights-offer funds would be earmarked for critical purposes, with a primary focus on reducing debt. The capital was also expected to stabilise the balance sheet and support the comprehensive turnaround strategy that included revitalising the core Pick n Pay business, driving growth in the Boxer and clothing divisions and addressing strategic errors.
Summers led the group previously. In the years after he left Pick n Pay had CEO changes in seeking revitalisation. Successive leaders struggled to reverse declining performance.
Investment analyst Chris Gilmour said previously that Richard Brasher streamlining of operations also introduced lingering challenges. His successor, Pieter Boone, launched the Ekuseni strategy, dividing the Pick n Pay brand into core and lower-income segments. The group has been in decline for more than 15 years.
A dramatic 373% drop in net profit, from a R1.17bn profit to a R3.2bn net loss reported earlier this year left Pick n Pay technically insolvent for the first time in its history.
Under Summers, the group is phasing out the QualiSave brand and integrating unprofitable stores into Boxer in an effort to address strategic missteps. Summers has been reviewing and dismantling the unsuccessful Ekuseni strategy and focusing on unbundling the group’s cash-cow Boxer division.
Ackerman Investment Holdings, the Ackerman family investment vehicle, will not be represented on the Boxer board after the unbundling following the family’s decision to relinquish control of Pick n Pay, with Gareth Ackerman to step down as chair in 2025, ending a 40-year tenure on the board.
Shareholder backing through the rights offer is a crucial vote of confidence in recovery plans, setting the stage for a potential revival of the retailer’s market position and financial stability. The rights offer consisted of an issue of 252.2-million new Pick n Pay ordinary shares at a subscription price of R15.86 per share, at the ratio of 51.11 rights offer shares for every 100 Pick n Pay ordinary shares held. The rights offer, which closed on August 2, was fully underwritten by Absa Bank, Rand Merchant Bank and Standard Bank.
As the rights offer was fully subscribed after taking into account excess applications received, the underwriters were not required to subscribe for any shares in terms of their underwriting commitments, Pick n Pay said on Monday. Rights offer shares will constitute about 33.8% of Pick n Pay’s post-rights offer share capital.
Pick n Pay had received a firm commitment from its controlling shareholder, Ackerman Investment Holdings, that it would follow its rights up to a maximum of R1bn. Certain other Pick n Pay shareholders also entered into irrevocable undertakings to subscribe for shares.
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