Johannesburg - Pick n Pay (PnP) Holdings received the thumbs up from the market yesterday as its share price leapt more than 13 percent on the JSE, after saying it would do away with the pyramid ownership structure introduced in 1981 by the controlling and founding Ackerman family.
Pick n Pay Holdings and Pick n Pay Stores were listed on the JSE, in a structure the firm said yesterday was outdated. The group said Pick n Pay planned to simplify its shareholding structure to boost the free float and increase demand for shares in the local supermarket chain. The holding company will spin off its 52.7 percent, or 257 million shares, the majority stake in Pick n Pay Stores.
Pick n Pay chairman Gareth Ackerman said: “Unbundling the pyramid will streamline the Pick n Pay Group into one listed entity, with benefits for the company and potentially for all shareholders. Over time, the simpler structure should improve Pick n Pay Stores’ appeal to investors, which could in turn help our long-term growth strategy.”
The move adds momentum to Pick n Pay’s turnaround strategy implemented over the past few years, which focuses on customers and cost-cutting in the face of a slowdown in consumer spending. It is battling to regain lost market to larger rival Shoprite, which has a market capitalisation of R91 billion, with Pick n Pay Holdings valued at R17bn and Pick n Pay Stores at R33.46bn.
The company said it had resolved to create a new class of unlisted voting shares in Pick n Pay Stores (B shares) and to issue B shares to the Ackerman family to maintain the effective voting rights that they currently hold in Stores.
Suvasha Kander, a fund manager at Ashburton Investments, said the move by Pick n Pay had been done to attract investors to the group and was necessary for its growth strategy going forward.
“It is a positive move. It is a known fact that the JSE wasn’t happy with the pyramid structure for too long. Actually, the JSE doesn’t favour or support companies with these structures like Pick n Pay and the company had to do something about it. This resulted in the company deciding on unwinding it,” Kander said. “However, the Ackerman family will be issued with B shares, so the Ackerman family effectively will maintain their majority voting rights at Pick n Pay Stores through the B shares.”
Ian Cruickshanks, an independent analyst, said Pick n Pay had been criticised in the past for having this kind of pyramid structure and it was surprising that it had taken this long to do something about it.
“Investors will be encouraged by what they are seeing now. However, the Ackerman family will still maintain voting control through B shares that they will be issued. So in that regard it is not really a true public company,” he said.
The perfect scenario, according to Cruickshanks, is for the company to unwind the new company and replace it with something else in order to limit the control the Ackerman family has in the group. “However, one hopes this is a start. To have this simplified capital structure is a necessary step in the right direction, but still they need to continue with it in the future. I don’t know whether the current chief executive Richard Brasher has something to do with it,” he said.
The company’s shares have gained almost 63 percent since Brasher, the former UK head of Tesco, who implemented the turnaround plan, took the reins in February 2013.
The company will vote on July 25 to collapse the structure. It has been said the Ackerman family introduced the pyramid structure to prevent a hostile takeover.
The shift away from the structure will increase the free float in the stock to about 73 percent from 46 percent.
Pick n Pay Stores fell 2.14 percent to R68.50, while Pick n Pay Holdings added 13.51 percent R32.26 yesterday.
BUSINESS REPORT