Pick 'n Pay, partly owned by South African Ackerman family, faces scrutiny over discounts in rights offer

Key Points:

• Pick ‘n Pay embarks on a R4-billion ($219.18 million) rights issue at a discount to reduce debt and stabilize its business.
• The supermarket giant plans a separate listing of its Boxer chain to attract investment and streamline operations.
• These strategic moves aim to regain market share and ensure long-term growth in a competitive retail market.

Pick ‘n Pay, one of South Africa’s leading supermarket chains, partly owned by the billionaire Ackerman family, is facing scrutiny over its discounting strategy amid a crucial rights offer.

The retail giant, renowned for its presence in the South African market, has recently been under the spotlight for its pricing tactics.

Discount strategy and recapitalization

Pick ‘n Pay understands the importance of discounts. Attractively pitching product lines to capture market share growth while maintaining viable margins is essential for sustainable success in a tough consumer market.

However, the supermarket giant has struggled to find the right balance in recent years. Pick ‘n Pay’s discounting prowess is once again under scrutiny as the company embarks on a much-needed recapitalization exercise.

Pick ‘n Pay initiated a R4-billion ($219 million) rights issue, offering shares at a discount of about one-third to its recent share price. This move marks the first major step in Pick ‘n Pay’s significant recapitalization plan aimed at reducing debt and stabilizing the business.

By pricing shares attractively, Pick ‘n Pay hopes to secure the necessary funds for financial restructuring. This discount strategy is a calculated risk, aiming to bolster investor confidence and ensure a successful recapitalization.

Boxer listing

In addition to the rights issue, Pick ‘n Pay plans to list its Boxer chain separately later this year. Boxer, known for its value offerings and strong presence in the lower-income market segment, is expected to draw significant investor interest. This move will not only provide additional capital but also allow Pick ‘n Pay to concentrate on its core operations and streamline its business model.

The Boxer listing is a maneuver to attract more investors, as it holds a strong market position with consistent growth potential. By spinning off Boxer, Pick ‘n Pay aims to unlock value for shareholders and create a more focused and efficient operational structure. This separation is anticipated to the distinct strengths and growth trajectories of both entities, thereby appealing to a broader investor base.

Market share and growth potential

These moves reflect Pick ‘n Pay’s approach to regaining market share and ensuring long-term growth. The recapitalization effort is designed to strengthen the company’s balance sheet, enabling investments in key areas and enhancing its competitive edge in the retail sector.

By reducing debt, Pick ‘n Pay aims to improve its financial health, making it more resilient in a challenging economic environment.

The company’ under Ackerman family focus on investments and operational efficiency is intended to drive sustainable growth. Pick ‘n Pay is committed to leveraging its strong brand presence and extensive market reach to capture a larger share of the retail market.

This approach aims to position Pick ‘n Pay as a leader in the industry, capable of navigating market fluctuations and maintaining profitability.

Pick ‘n Pay, established in 1967, holds a huge position in Africa’s retail sector with a network exceeding 2,000 stores across eight African countries. As the nation’s second-largest retailer, it trails behind Shoprite Holdings, partly owned by South African billionaire Christo Wiese.