Banks get R80m in fees as Pick n Pay raises R4bn

Three investment banks – RMB, Absa and Standard Bank – were paid a total of R80 million for their role as underwriters in Pick n Pay’s just-concluded rights offer.

Underwriters effectively guarantee that funds sought by a company in a rights issue will be raised. The underwriting fees equate to 70% of all fees paid for the capital raise. The retailer has raised R4 billion after its successful completion.

Pick n Pay had subscriptions of over R8.2 billion, or 106% of the amount it had planned to raise. Nearly 99% of shareholders followed their rights. After the founding Ackerman family, the Public Investment Corporation is the next largest shareholder (17.8%), with a Fidelity fund and Allan Gray fund each holding roughly 7%.

The strong support is not at all surprising given the significant discount at which the rights offer shares were pitched.

At R15.86, this was around a third cheaper (32.48%) than the price it had been trading at prior to the announcement.

“We are really pleased with this result,” says CEO Sean Summers.

“The successful conclusion of the Rights Offer demonstrates the market’s strong confidence in our iconic brand and in our turnaround strategy. It marks a crucial first step in our recapitalisation plan, positioning the Group well to fund long-term sustainable growth.

“We can now intensify our focus on our core Pick n Pay retail business. This achievement underscores our commitment to executing our strategy.

“We appreciate this incredible support from our shareholders.”

Fees for all

The banks were paid an underwriting fee of 1.5% of the amount raised (R4 billion), which is R60 million. A further 0.5% was paid as a “stand-by fee”.

The fees were equally distributed across the three banks, meaning each was paid R26.667 million.

It has a total of R12 billion of loan support from lenders as part of its turnaround. The three underwriters have exposure across these.

It has a R1 billion bilateral facility with RMB, and a total of R4.5 billion in syndicated loans linked to sustainability. These are four facilities provided by Absa, RMB, Standard Bank and Investec. Across the general facilities, Absa’s facilities (including overdraft) total nearly R2 billion, RMB’s is R1 billion and Standard Bank’s R1.3 billion.

The importance of Boxer

All of the various facilities are secured by shares (and claims) in Boxer.

In other words, if the recapitalisation plan were to fail for whatever reason, the banks take shares in Boxer.

Pick n Pay has pledged to repay at least R3 billion of these loans from the proceeds of the recapitalisation.

The lenders are also able to increase interest rates across all facilities by 1% if the listing of Boxer is delayed.

The Ackerman family, via various vehicles and individually but chiefly via Ackerman Investment Holdings (AIH), entered into irrevocable undertakings to follow their rights in the capital raise.

AIH – of which Gareth Ackerman, Jonathan Ackerman, Suzanne Ackerman and David Robins are Pick n Pay directors or associates – holds around 125 million shares in the group, which comprises 25.3% of the ordinary shares and 95.1% of the higher-voting B shares. AIH subscribed for 64 million rights offer shares at a total value of R1.015 billion.

The group says it intends to use the R4 billion in proceeds as well as the capital raised from the initial public offering of Boxer (which will total between R10 billion and R12 billion) to:

• Reduce group long-term debt levels, which will save on interest costs currently being charged by the group’s lending banks;
• Allow progress on the turnaround strategy of the Pick n Pay Supermarket business;
• Unlock shareholder value inherent in the group; and
• Facilitate the incremental operational funding needed for the remainder of the 2025 financial year.

The listing of Boxer on the JSE is on track and will take place “towards the end of the year”.