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South Africa’s Ackerman family reduces voting power to attract investors

Ackerman Investment Holdings will reduce its voting control in Pick ‘n Pay Stores to below 50 percent after a planned rights offer

by Oluwatosin Racheal Alabi
Gareth Ackerman

Key points:

  • Ackerman Investment Holdings will reduce its voting control in Pick ‘n Pay Stores to below 50 percent after a planned rights offer.
  • This move is intended to attract new investors and help the struggling retailer.
  • CEO Sean Summers believes the change will improve external perceptions of the company.

Pick ‘n Pay, a leading South African supermarket chain controlled by the wealthy Ackerman family, is reducing their voting power in Pick ‘n Pay stores to attract new investors and help the struggling South African retailer.

Ackerman Investment Holdings, the family’s holding company, will reduce its voting control in Pick ‘n Pay Stores to below 50 percent after completing a planned rights offer, this change aims to improve how the company is viewed by outsiders, according to CEO Sean Summers.

The Ackerman family isn’t alone in maintaining the control over their company. Meta Platforms’ Mark Zuckerberg and Alphabet’s founders also have considerable influence over their firms through dual-class shares, which grant them greater voting rights. This structure, often criticized by investors for raising corporate governance concerns, is similar to how Johann Rupert, South Africa’s richest man, controls Richemont.

“The appalling performance of Pick ‘n Pay over a decade is good evidence then that family control is not always a good idea. The problem with control structures is it allows pretty much one person to make the important calls and if they get it wrong, there can be very serious consequences,” said Shane Watkins, chief investment officer at All Weather Capital Pty.

Financial challenges and recovery plans

Pick ‘n Pay’s shares have fallen 30 percent in the past year, while larger rival Shoprite Holdings saw a 31-percent gain. Additionally, Pick ‘n Pay reported its first annual loss for the year ending Feb. 25. Summers, rehired as CEO last year, has a three-year turnaround plan that includes selling shares in the Boxer unit for up to R8 billion ($446 million) and raising R4 billion ($223 million) through a rights offer.

“The balance sheet was completely upside down, with a funding structure that was patently against us,” Summers, 70, said. Still, Pick ‘n Pay finished up its initial investor roadshow for Boxer last week and “the response has been phenomenal,” he said.

Shifting control structures

The practice of founders holding greater voting power was prevalent in South Africa during years of apartheid-related isolation. However, this is now changing as other tycoons are also relinquishing control of the companies they founded.

In 2021, Dis-Chem Pharmacies co-founder and CEO Ivan Saltzman sold part of the family’s shares to improve liquidity and retain key executives.

Christo Wiese used extra voting shares to secure his re-election as Shoprite chairman in 2019. Although he stepped down a year later, he remains on the board despite selling shares after losing about R59 billion when Steinhoff International Holdings NV collapsed in 2017.

Struggles in letting go of control

“A lot of our family owners in South Africa overstay their welcome,” said David Shapiro, who has more than 50 years of experience on Johannesburg’s stock exchange and is chief global equity strategist at Sasfin Securities. “Though to actually move out is a very difficult decision to make.” Wiese has argued that a significant shareholder is important when there are big decisions to be made and that “you don’t just parachute people in.”

Stephen Saad, the founder and CEO of Aspen Pharmacare Holdings, agrees. He has been key in growing Aspen into Africa’s largest drugmaker. He is the single biggest individual shareholder with about 13 percent of Aspen’s stock but doesn’t control the company through special voting shares.

While Pick ‘n Pay expects the new structure to help lure investors, the retailer will still be closely associated with its founding family. “Pick ‘n Pay is inextricably linked to the Ackermans for those that have an itch or irritation with the control structures, I say, Pick ‘n Pay without the Ackermans is worse off,” Summers said.

Established in 1967, Pick ‘n Pay holds a top position in South Africa’s retail sector, ranking as the second-largest retailer in the nation. The Ackerman family, known for their wealth and diverse holdings, owns a substantial 25.53-percent stake in Pick ‘n Pay, equivalent to 124,677,238 shares.

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