Pick n Pay Announces ZAR4.0 Billion Rights Offer

Pick n Pay Stores Limited has declared a ZAR4.0 billion rights offer. This move aims to improve the company’s liquidity […]

Pick n Pay Stores Limited has declared a ZAR4.0 billion rights offer. This move aims to improve the company’s liquidity and support its turnaround strategy. Shareholders approved this decision at an extraordinary general meeting (EGM) on June 26, 2024.

Background

Pick n Pay has faced financial challenges recently. For the financial year ending February 25, 2024, the company reported significant losses. The core Pick n Pay supermarket business experienced a trading loss of ZAR1.5 billion. Overall, the Group posted a loss of ZAR3.2 billion, including asset impairments.

Financial Struggles

The company’s net debt also escalated, rising from 1.1 to 6.3 times EBITDA. This was excluding the impact of IFRS 16 leases. A non-cash asset impairment of ZAR2.8 billion added to the financial strain. These factors severely pressured the Group’s liquidity and solvency.

Recapitalisation Plan

The board announced a two-step recapitalisation plan in February 2024. This includes the ZAR4.0 billion rights offer and a proposed IPO of shares in Pick n Pay’s Boxer business. The Boxer IPO will be listed on the JSE’s Main Board.

Use of Proceeds

The proceeds from the rights offer and the Boxer IPO will primarily be used to reduce the Group’s outstanding debt. The funds will also be reinvested to secure the turnaround of the Pick n Pay supermarket business.

Objectives

The Group aims to:

  • Reduce long-term debt levels
  • Improve liquidity and save on interest costs
  • Facilitate the delivery of the turnaround strategy
  • Unlock shareholder value
  • Provide incremental operational funding for the remainder of the 2025 financial year

Terms of the Rights Offer

Pick n Pay is targeting gross proceeds of ZAR4.0 billion. The rights offer will allow shareholders to subscribe for new Pick n Pay ordinary shares. Shareholders will not be allocated a fraction of a rights offer share. Whole numbers of shares will be issued, with 0.5 or greater rounded up and less than 0.5 rounded down.

Important Dates

EventDate
Finalisation announcementJuly 11, 2024
Rights Offer Circular availableJuly 15, 2024
Last day to trade in Shares (cum rights)July 16, 2024
Shares commence trading ex-rightsJuly 17, 2024
Listing of Letters of AllocationJuly 17, 2024
Rights Offer opensJuly 22, 2024
Last day for trading Letters of AllocationJuly 30, 2024
Rights Offer closesAugust 2, 2024
Rights Offer Shares issuedAugust 5, 2024
Results announcementAugust 5, 2024

Conclusion
Pick n Pay’s rights offer is a strategic move to stabilize its finances and support its turnaround strategy. The funds raised will help reduce debt and improve liquidity. This will ultimately support the company’s long-term goals and unlock shareholder value. The market will be watching closely as Pick n Pay executes this significant recapitalisation plan.