Troubled retailer Pick n Pay yesterday laid down terms for its R4 billion capital raise, offering 252.2 million new shares at a 32% discount, with the company’s stock dipping 3% in early trade on the JSE before overturning its losses for the day into a 0.91% gain, just before day-end.
The company’s rights offer, announced earlier this year as part of a restructuring exercise to turnaround its plummeting fortunes, and losses will consist of an offer of 252 206 809 renounceable rights to subscribe for new Pick n Pay ordinary shares.
Pick n Pay has set a subscription price of R15.86 per share for the rights offer share.
Wayne McCurrie, wealth and investments analyst at FNB, said the financially struggling grocer was offering the shares at a 32% discount, adding that shares in the company had trended down by 3% in early trade on the announcement.
However, Pick n Pay had erased its earlier share losses for the day as it traded at R27.38, just before the close of yesterday’s trade session.
On Wednesday, Pick n Pay closed at R27.39 per share on the JSE. The shares on issue under the rights offer constitute approximately 33.8% of Pick n Pay’s post-rights offer share capital.
Market analyst Simon Brown told Business Report that the terms laid down by Pick n Pay for its rights offer were “not bad considering that the high share price” had helped the company under its latest scheme.
Pick n Pay said it had already received “all the necessary approvals to implement the rights offer” which was now unconditional.
South African banks Absa, RMB and Standard Bank are underwriting the capital raise.
Pick n Pay chairman Gareth Ackerman – whose family has agreed to relinquish control of the grocer – is supportive of the rights offer.
The Ackerman family investment firm has also tendered a “firm commitment” to participate in the rights offer for an amount of up to R1bn.
“Certain other Pick n Pay shareholders have also entered into irrevocable undertakings in favour of Pick n Pay to subscribe for, and/or to recommend to their clients to subscribe for, and pay for in full, all of the rights offer shares which such Pick n Pay shareholders are entitled to,” the company said.
The Ackerman family and other such shareholders interests under the scheme would represent about 45% of the current Pick n Pay ordinary shares in issue.
Proceeds of the rights offer and the Boxer IPO will be used to settle Pick n Pay’s outstanding debt, in addition to possible reinvestment into its operations. The reinvestment strategy will be expected to “secure the turnaround of Pick n Pay’s supermarket” business.
In the year to end February, 2024 Pick n Pay’s supermarket business tipped into a substantial trading loss of R1.5bn. The group’s overall loss for the period amounted to R3.2bn, including asset impairments for the same period.
The decline in Pick n Pay’s earnings and an escalation in the group’s net debt position resulted in net debt increasing from 1.1 to 6.3 times earnings before interest, taxes, depreciation, and amortisation (Ebitda) for the full-year under review.
BUSINESS REPORT