Rights offer of Pick 'n Pay, partly owned by South African Ackerman family, oversubscribed

Oluwatosin Racheal Alabi -

Key Points:

  • Pick ‘n Pay raised 4 billion rand ($217 million) in an oversubscribed rights offer, demonstrating strong market confidence in their brand.
  • The raised funds will reduce debt, stabilize finances, and support a turnaround strategy involving store closures and conversions.
  • CEO Sean Summers leads efforts to regain market share from rivals like Shoprite, aiming for sustainable growth and improved profitability.

Pick ‘n Pay, South Africa’s third-largest grocery group, raised 4 billion rand ($2.5 million) through a rights offer that was 106-percent oversubscribed. This step is key in the company’s plan to reduce debt and revitalize operations.

Successful Rights Offer Demonstrates Market Confidence

Pick ‘n Pay operates 2,279 stores in South Africa and seven other African countries. It announced that 98.7 percent of shareholders exercised their rights, with excess applications totaling 4.3 billion rand ($2.7 million).

Only 1.3 percent of excess rights offer shares were needed to reach full subscription, so joint underwriters were not required to subscribe for any shares.

“The successful conclusion of the rights offer shows the market’s strong confidence in our brand and strategy,” said CEO Sean Summers. This marks a crucial step in the group’s recapitalization plan, positioning Pick ‘n Pay for long-term growth.

The funds will pay down debt, stabilize the balance sheet, and invest in the turnaround strategy. This includes closing or converting over 100 loss-making stores to improve efficiency.

Challenges and Strategic Changes

Summers is leading efforts to revive the retailer with a comprehensive turnaround plan. Over the past decade, Pick ‘n Pay has lost market share to larger competitors like Shoprite.

The core supermarket business faced challenges, resulting in a trading loss of 1.5 billion rand ($0.9 million) in the Pick ‘n Pay division and an overall group loss of 3.2 billion rand ($2 million) for the fiscal year ending February 25. Meanwhile, the group’s net debt rose to 6.1 billion rand ($3.8 million).

The rights offer’s success shows investor confidence in Pick ‘n Pay’s potential to recover and thrive. It reflects belief in the company’s ability to execute its turnaround plan effectively, ensuring sustainable growth and stability in the competitive retail market.

Moving forward, Pick ‘n Pay aims to use this financial boost to implement strategic initiatives, streamline operations, and regain its competitive edge.

The company’s leadership remains optimistic that these efforts will lead to improved financial performance and increased shareholder value in the coming years.

Pick ‘n Pay, established in 1967, holds a major 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.