Brilliant investment that turned R186 million into R30 billion

Pick n Pay CEO Sean Summers bought Boxer in 2002 for R185.8 million. Today, it is worth R30 billion, making it one of the best investments in South Africa’s corporate history.

Boxer has its origins in Empangeni, KwaZulu-Natal, in 1977 when the founders started a store named KwaZulu Cash & Carry.

KwaZulu Cash & Carry focused on supplying wholesale essential goods at low prices in the surrounding area.

The company experienced rapid growth, driven by increased demand for its offerings among rural and peri-urban customers.

To serve a larger group of customers, it repositioned its brand as a discount food retailer in the lower-income market and changed its name to Boxer Cash & Carry.

Over the years, the “Cash & Carry” disappeared from the name, and the company became known as Boxer.

In 2002, Pick n Pay, under the leadership of CEO Sean Summers, acquired Boxer for R185.8 million. At the time, Boxer had 37 stores in KwaZulu-Natal, Eastern Cape, and Mpumalanga.

R149.9 million of the R185.8 million that Pick n Pay paid for Boxer was goodwill, which indicates that it paid significantly more than the fair market value of the net assets of the retailer.

It raises questions about whether Pick n Pay overpaid for Boxer. The answer is a resounding no, based on Pick n Pay’s strategy and what happened over the last 23 years.

At the time, Pick n Pay was on an expansion drive and planned to open 95 new stores across all formats of the business.

Boxer would help it to expand Pick n Pay’s reach into rural and peri-urban areas, specifically in KwaZulu-Natal and the Eastern Cape, where it was underrepresented.

The strategy to use Boxer as a vehicle to compete in the discount grocery retail market across South Africa was a masterstroke.

The retailer launched Boxer Build in 2004 and Boxer Liquors in 2009. It has also grown its store numbers at an annual compound growth rate of 14% since 1977.

Today, Boxer has 525 stores, consisting of 320 Boxer Superstores, 175 Boxer Liquors, and 30 Boxer Build stores.

Over the last year, Boxer launched 48 new stores, with plans to launch another 25 superstores and 35 liquor stores over the next year.

Boxer grew its turnover by 10.4% to R42.3 billion and trading profit by 7.0% to R2.3 billion, with an exceptional 5.4% trading margin.

The investment turned R186 million into R30 billion

Boxer was listed on the Johannesburg Stock Exchange (JSE) on 28 November 2024 following an initial public offering (IPO) which closed on 22 November 2024.

The IPO concluded with 157.4 million shares being allocated to qualifying investors at a share price of R54 per Boxer share.

This raised R8.5 billion for Pick n Pay, while retaining a 65.5% shareholding in Boxer. It was the final part of the retailer’s two-step recapitalisation plan.

The JSE listing also revealed what the market valued Boxer at. On the first day of trading, the share price jumped to R67.00.

Boxer continued to trade between R63.00 and R72.50 per share, with the retailer’s market cap hovering at around R30 billion.

This means that Pick n Pay’s R185.8 million investment grew to R30 billion. Boxer achieved this increase without Pick n Pay having to use capital to fuel this growth.

Sean Summers, who returned as Pick n Pay CEO in 2023, said he felt an extraordinary sense of pride in what the Boxer business has grown to become.

“We saw the potential in Boxer over 23 years ago when we first bought the company, and I have no doubt it will grow as a formidable contender in the retail sector,” he said.

Interestingly, Summers’ brilliant decision two decades ago to buy Boxer during his first tenure as CEO helped him save Pick n Pay during his second tenure.

“It is extraordinary that it is Boxer to save the day for Pick n Pay and put the oxygen back into our lungs,” he said.