Pick n Pay pushes ahead with R4 billion plan to save itself

Pick n Pay is proceeding with a Rights Offer to raise R4.0 billion as part of the group’s turnaround plan.

The group previously said that the proceeds would stabilise its balance sheet, priming it for longer-term sustainable growth.

For the year ended 25 February 2024, the group recorded a R3 billion loss following the poor performance of its Pick n Pay grocery stores.

The financial results were also impacted by increased interest charges due to increased gearing and a R2.8 billion non-cash store asset impairment in the group’s core Pick n Pay grocery stores.

On a technical level, the rights offer consists of 252,206,809 renounceable rights to subscribe for new Pick n Pay ordinary shares (Rights Offer Shares) in the ratio of 51.11 Rights Offer Shares for every 100 Pick n Pay ordinary shares held by a Pick n Pay shareholder.

The Rights Offer Shares will have a subscription price of R15.86 per Rights Offer Share, marking a 32.48% discount on the closing price of R27.39 per share on Wednesday, 10 July.

The Rights Offer Shares will constitute approximately 33.8% of Pick n Pay’s post-Rights Offer share capital.

Absa Bank Limited, Rand Merchant Bank, and Standard Bank of South Africa fully underwrite the Rights Offer.

Pick n Pay shareholders will be allowed to commence trading the letters of allocation at 09:00 on Wednesday, July 17, 2024, until the close of business on Tuesday, July 30, 2024.

In addition, the controlling shareholder, Ackerman Investment Holdings (RF) Proprietary Limited, will follow its rights up to a maximum amount of R1.01 billion.

The Ackerman family have been controlling Pick n Pay for decades, with the founder Raymond Ackerman (who passed in 2023) being succeeded by his son Gareth as chairman.

Pick n Pay needs cash

The rights offer forms part of a two-step capital raise to stabilise the group’s balance sheet, strengthen liquidity and unlock shareholder value.

The R4 billion rights offer is expected to be followed by listing shares in the Boxer business towards the end of 2024.

Boxer and Pick n Pay clothing were among the company’s only bright sparks in the 2024 financial year, making R1.9 billion in trading profit.

The group previously said that it intends to keep its majority stake in Boxer after the Initial Public Offering (IPO).

Pick n Pay CEO Sean Summers previously said that the capital raise would allow the group to start focusing on the core Pick n Pay retail business by reducing debt.

“Our balance sheet needs to be restructured and stabilised,” said Summers.

“This is the appropriate action, at the right time, to help our turnaround strategy.

“We have totally reorganised our leadership team and strengthened and simplified our operational structure to drive rapid decision making, focusing on better in-store execution and excellent customer service.”

“Cutting debt and creating a sustainable platform for investment in growth is the next big step towards unlocking the Group’s clear potential, and more details of our turnaround plan will be announced when we release our results in May.”

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