Equities

Pick n Pay Details $221M Revamp Offer, Plans Boxer IPO

Pick n Pay announces $221 million rights offer as part of three-year turnaround plan.

By Max Weldon

7/11, 04:46 EDT
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Key Takeaway

  • Pick n Pay announces a $221 million rights offer at 42% discount, part of a turnaround plan including store revamps and an IPO for its Boxer business.
  • South Africa's new pension fund law allows early access to savings, expected to boost retail and building stocks due to increased consumer spending.
  • Peach Property Group plans significant cash-raising efforts, including equity from shareholders and property sales, to address a €300 million bond maturity.

Pick n Pay's Rights Offer

Pick n Pay Stores Ltd., South Africa’s third-largest grocer by revenue, has announced the terms of a 4 billion-rand ($221 million) rights offer. The Cape Town-based company will offer 252.2 million shares at 15.86 rand each, which is 42% less than the closing price on July 10. Ackerman Investment Holdings Pty Ltd., the holding company for the family of Pick n Pay founder Raymond Ackerman, has committed to following its rights up to 1.01 billion rand. Other shareholders, together with AIH, hold about 45% of the shares in issue currently and have also indicated their participation in the offer.

The rights offer is part of a broader three-year turnaround plan led by CEO Sean Summers, who was brought back abruptly last year. The plan includes sifting out under-performing stores from about 100 outlets that may be converted, refurbished, or closed to return the company to profitability. Additionally, Pick n Pay plans to follow the rights offer with an initial public offering of its low-cost Boxer business, likely by the end of this year.

Pension Fund Reform in South Africa

South Africa’s new pension fund law, effective from September 1, allows savers early access to part of their pension funds, which is expected to significantly improve retirement outcomes. Alexander Forbes Group Holdings Ltd. stated that the new law will enable savers to contribute one-third of their savings into an account accessible at any time, with the rest only available at retirement. This change is expected to lead to a deluge of withdrawals in the near term, but the preservation of the larger portion means more savers can retire more comfortably.

“For new members going forward, they’re expected to have a 2 to 2 1/2 times better retirement outcome,” said John Anderson, Alexforbes Solutions Executive, during a webinar. The rule change also allows savers a one-off opportunity to withdraw as much as 30,000 rand ($1,660) as the system changes. Alexforbes estimates that the industry will see outflows of about 1% to 2%, with total exiting funds of as much as 100 billion rand.

Retailers are likely to benefit from this change as people often use these savings for consumption purposes. “We also expect some minimal benefit to accrue to building stocks because people typically use the funds to repair and renovate their home,” said Ann Leepile, Alexforbes Investments Chief Executive Officer.

Peach Property Group's Cash-Raising Plans

Peach Property Group AG, a specialist in German residential properties, is exploring options to raise fresh cash as it prepares to address a €300 million ($325 million) bond maturity due next year. CEO Gerald Klinck mentioned that the company is considering asking shareholders, including Ares Management Corp., for additional equity, as well as selling non-strategic properties. The company is also mulling raising preferred equity, which would involve selling a stake in a portfolio of assets with enhanced terms for the buyer.

Klinck declined to specify the overall amount Peach hopes to raise but indicated it would be a significant amount. “It’s not €300 million, and it’s not €50 million. It is a significant amount,” he said. Peach is also considering coaxing creditors into agreeing to push back the bond maturity. “It’s likely that we have here maybe an extension to discuss with the bondholders,” Klinck said.

Peach’s anchor shareholders have already contributed around 16.9 million Swiss francs ($18.8 million) this year in new shares. Despite the refinancing challenge, Peach aims to avoid selling large portfolios to raise cash, as that would impact future earnings. Instead, the focus will be on boosting earnings by increasing occupancy through renovating properties and hiking rents to market levels.

Management Quotes

  • Sean Summers, CEO of Pick n Pay:

    "We are sifting out under-performing stores from about 100 outlets that may be converted, refurbished or closed as part of the South African grocer’s strategy to return to profitability."