Pick n Pay announced it would sell down a further 11.5% of its subsidiary Boxer valued at up to R4.7 billion to shore up its balance sheet and to ensure that the turnaround under Sean Summers is seen to fruition.
The announcement, which has been somewhat expected by the market, would see Pick n Pay end up with about 54% of Boxer, from the more than 65% that it currently owns.
On Tuesday, it said that shares were successfully placed at R82 each and that it actually ended up selling 57.3 million Boxer shares, which equates to 12.5% of the discount retailer. Following this placement, Pick n Pay now holds 53.1% of Boxer.
Until now, the quantum of what would be disposed of in an attempt to save the core business wasn’t known and some analysts thought that Pick n Pay might’ve ‘got away’ with less.
Pick n Pay has no need for cash right now, but this is somewhat of an insurance policy going forward.
The business, albeit stuttering according to recent reports and updates, remains on track to return to profitability.
Turnaround plan progresses
The group says it has “made significant progress on multiple aspects of the Pick n Pay turnaround plan. The product offering has been meaningfully enhanced, execution of in-store retail principles has been improved, and the quality of the store estate has been upgraded”.
It has shuttered or converted nearly 100 stores.
It says a new logistics agreement is set to deliver efficiencies over the coming years.
In combination, these factors have driven improved like-for-like sales growth in Pick n Pay company-owned supermarkets, together with improved gross margin, and are set to deliver further benefits going forward.
Section 189 process underway
“Pick n Pay is also engaged in ongoing consultations with our labour partners to improve store operating efficiencies and costs. Building on this progress, the group remains focused on further strengthening the performance of the Pick n Pay segment cashflow generation and returning it to profitability.”
The group initiated a Section 189 process earlier this month and it is seeking to alter the flexibility of its labour arrangements.
Along with this, the turnaround in sales continues to labour on.
The group says it “intends to deploy the net proceeds from the placement to support the ongoing implementation of its turnaround plan and growth strategy, while ensuring maximum financial flexibility over the medium term.
“This will enable the group to continue executing on its strategic priorities, investing ahead of the plan, with a clear pathway to returning the core Pick n Pay Stores segment to cashflow break-even.”
Key to growth
However, it reiterates that “aligned with these objectives, Boxer remains a vital part of the group”.
“Pick n Pay is committed to retaining a controlling stake in Boxer and to participate in its impressive growth trajectory, as it continues to be a key engine of value creation for the group and its investors.”
After the sale of this chunk of Boxer, Pick n Pay says it will continue to hold more than 50% of Boxer.
Market watchers suggest that while Pick n Pay may not need the cash right now, given where Boxer is currently trading (R88.64 at Monday’s close versus a listing price of R54), it would’ve been naïve not to take advantage of this opportunity.
Pick n Pay originally listed Boxer in 2024 as part of its two-step recapitalisation programme. It undertook a R4 billion rights offer and also raised R8.5 billion in Boxer’s IPO, in which it sold a roughly 35% stake. This ensured Pick n Pay was debt-free and had a substantial cash pile needed for its complex multi-year turnaround.
This article was republished from Moneyweb. Read the original here.
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