SOUTH AFRICA – The board of South Africa’s leading retailer, Pick n Pay, has unanimously approved a capital raise aiming to stabilize its balance sheet, enhance liquidity and unlock shareholder value.

The move is aimed at providing near-term liquidity, strengthening the group’s financial position, and creating a foundation for sustainable long-term growth.

The proposed two-step equity capital raise will involve a right offer to existing shareholders, expected around mid-year, followed by an offering and listing of shares in the group’s Boxer business towards the end of 2024.

The Group aims to retain a majority stake in Boxer post the IPO and seeks to raise up to R4 billion through the Rights Issue.

The terms of the capital raise are still being finalized, subject to final board approval, as well as requisite shareholder and regulatory approvals. The Ackerman family has given their in-principle support for the two-step capital raise.

Pick n Pay CEO, Sean Summers emphasized that reducing debt through the proposed capital raise would enable the group to refocus on its core Pick n Pay retail business.

The retailer reported a challenging trade performance from its Pick n Pay supermarket business, with sales down -0.1% for the 47 weeks ending January 21, 2024.

Increased inventory levels and strategic investments in Boxer, Pick n Pay Clothing, and asap! contributed to a notable increase in net debt.

Summers highlighted the need to restructure and stabilize the balance sheet as a crucial step in the turnaround strategy.

He revealed that the leadership team has undergone a significant reorganization, focusing on rapid decision-making, in-store execution, and excellent customer service.

Despite challenges in its traditional supermarkets, Pick n Pay reported positive performances from its Boxer business, with sales growth of 17.1%, and Pick n Pay Clothing stores, which delivered strong sales growth of 17.5%. Pick n Pay Online also showed robust growth with a 75.8% increase in sales.

The Group’s engagement with key lenders resulted in agreements providing sufficient time and flexibility to assess the group’s gearing position and determine the optimal course of action to correct the capital structure.

Summers expressed gratitude to the lenders for their continued support, emphasizing that the steps taken now to stabilize the balance sheet will lay the foundation for Pick n Pay’s future growth.

The detailed terms of the planned capital raise are expected to be released after the announcement of the Group’s full-year results in May.

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