Profit at the check­out

Sum­mers smooths exit from Pick 'n Pay

Finweek English Edition - - Companies & markets - LLEWELLYN JONES llewellynj@fin­

PICK ’N PAY CEO Sean Sum­mers was seen to be smooth­ing his way out of the re­tail gi­ant last week ahead of his of­fi­cial de­par­ture date at the end of this month.

Sum­mers sold R22m worth of stock in both Pick ’n Pay stores and the pyra­mid hold­ing com­pany, Pick ’n Pay Hold­ings, which is con­trolled by the Ack­er­man fam­ily. Sum­mers could hardly have timed his exit bet­ter, with both shares trad­ing near record highs boosted by an eco­nomic boom of gar­gan­tuan pro­por­tions over the past five years.

Al­though when he an­nounced his de­par­ture last Au­gust Sum­mers said he would keep the bulk of his as­sets in­vested in the group, it’s in­ter­est­ing to note that he sold out of the hold­ing com­pany lock, stock and bar­rel. The shares were pur­chased by the Ack­er­man fam­ily, no doubt keen to main­tain its grip on the group.

Ac­cord­ing to Pick ’n Pay’s an­nual re­port for 2006, Sum­mers still owns just over 2,5m shares in the op­er­at­ing com­pany (Pick ’n Pay Stores) af­ter this sale, worth R87,3m.

He also has 2,5m out­stand­ing share op­tions in the com­pany’s gen­eral share scheme, and an­other 2,6m in the ex­ec­u­tive share scheme. The profit on th­ese out­stand­ing op­tions is around R130m.

The prob­lem is that most of th­ese op­tions only ma­ture af­ter his of­fi­cial de­par­ture date. The com­pany has to date given no in­di­ca­tion of how it in­tends deal­ing with this awk­ward fact. And, of course, once Sum­mers has left the com­pany and is no longer a di­rec­tor, the com­pany won’t be obliged to dis­close any deal­ings with him.

Per­haps we can per­suade one of the fund man­agers with some ac­tivist cre­den­tials, like Al­lan Gray or Coro­na­tion, to raise the is­sue at the com­pany’s next AGM and not to let go un­til it has an an­swer.

At Mr Price, joint chair­man Lau­rie Chi­ap­pini was also seen of­fload­ing a large por­tion of his hold­ing in the fash­ion re­tail group. The R14,5m worth of shares sold rep­re­sented around 40% of Chi­ap­pini’s hold­ing in the or­di­nary share cap­i­tal of Mr Price.

Both Chi­ap­pini and fel­low joint chair­man Stu­art Co­hen have liq­ui­dated a large por­tion of their hold­ings in the past two years. De­spite their tiny eco­nomic in­ter­est in the group, they main­tain con­trol of the busi­ness through high-vot­ing “B” or­di­nary shares that carry 12 votes for ev­ery share.

Al­though Chi­ap­pini and Co­hen are listed as non-ex­ec­u­tive direc­tors, they still draw salaries from the group, which amounted to around R4,8m each in the last fi­nan­cial year.

Fi­nally, we have to spare a men­tion for Sim­mer & Jack Mines’ CEO Gor­don Miller and di­rec­tor John Berry, who made a roar­ing profit on op­tions.

But in the Sens an­nounce­ment, the com­pany notes that the direc­tors sold the shares “in or­der to ex­er­cise op­tions” in Sim­mers and sub­sidiary First Ura­nium Cor­po­ra­tion. Oh please. Why try and spin the bla­tantly ob­vi­ous fact that they sold the bulk of the shares be­cause they were mak­ing a very tidy profit out of it? They only needed to sell a frac­tion of the shares to ex­er­cise the op­tions.

Ex­cel­lent tim­ing.

Sean Sum­mers

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