Pick ‘n Pay, South Africa’s third-largest grocery chain, raised 4 billion rand ($2.5 million) in a rights offering that was 106% oversubscribed. This move is critical to the company’s strategy to reduce debt and reinvigorate operations.
Pick ‘n Pay has 2,279 outlets across South Africa and seven other African nations. It reported that 98.7% of stockholders exercised their rights, with excess applications reaching 4.3 billion rand ($2.7 million).
Only 1.3 percent of excess rights offer shares were required to achieve full subscription, hence joint underwriters were not obliged to subscribe for any shares.
“The successful conclusion of the rights offer shows the market’s strong confidence in our brand and strategy,” Sean Summers, our CEO, remarked. This is a critical milestone in the group’s recapitalization strategy, setting Pick ‘n Pay for long-term growth.
The proceeds will be used to pay down debt, balance the books, and invest in the turnaround strategy. This includes shutting or converting more than 100 loss-making stores to increase efficiency.
Summers is spearheading efforts to restore the business through a comprehensive recovery strategy. Over the last decade, Pick ‘n Pay has lost market share to larger competitors such as Shoprite.
The main supermarket business struggled, resulting in a trade loss of 1.5 billion rand ($0.9 million) in the Pick ‘n Pay division and a total group loss of 3.2 billion rand ($2 million) for the fiscal year ending February 25. Meanwhile, the group’s net debt increased to 6.1 billion rands ($3.8 million).
The rights offer’s success demonstrates investor confidence in Pick ‘n Pay’s ability to recover and thrive. It indicates confidence in the company’s capacity to carry out its turnaround strategy successfully, assuring long-term growth and stability in the competitive retail industry.
Moving forward, Pick ‘n Pay intends to use this cash boost to undertake strategic initiatives, improve operations, and reclaim a competitive advantage.
The company’s leadership remains optimistic that these measures will result in greater financial performance and higher shareholder value in the future years.
Pick ‘n Pay, founded in 1967, is a key player in Africa’s retail sector, with over 2,000 outlets throughout eight African countries. It is the nation’s second-largest retailer, trailing only Shoprite Holdings, which is owned in part by South African billionaire Christo Wiese.
