Updating the dynasty at Pick n Pay
Pikwik Papers | Just shy of its half-century, grocery chain will modernise family shareholding, writes Adele Shevel
THE Ackerman family is the latest dynasty to shift gears in how it controls the company it founded, after years of shareholder pressure to collapse the pyramid structure that has given the family artificial control.
The structure, in place since 1981, was meant to protect the retailer against predators and hostile takeovers when it was rumoured there were fears that Anton Rupert of Rembrandt and Jan Pickard of Sanlam were planning to pounce.
Pick n Pay said at the time that the structure was to ensure that the founding values of the business remained in place. But new pyramid structures have been banned by the local bourse for several years, and are anathema to many overseas investors.
Local criticism about the pyramid structure has surfaced over the past decade as Pick n Pay lost its way with outdated systems and declining market share. Competitors Shoprite, Woolworths and Spar streaked ahead,
leaving the retailer to battle its underperformance, and shareholders frustrated at their inability to effect change.
Chairman Gareth Ackerman continued to defend the Pikwik pyramid and extolled the virtues of family-owned businesses in the face of the criticism. The group embarked on a turnaround process, which is now bearing fruit.
Jean Pierre Verster, portfolio manager at Fairtree Capital, said he wouldn’t be surprised if the JSE had put pressure on the group.
“Pick n Pay is probably the most visible company with a pyramid structure, where the economic and voting interests are not aligned.”
Verster said there were other, more efficient ways of obtaining voting control without having an impact on shareholders by trapping economic value, which is what happened at Pick n Pay. The Rupert family at Remgro has voting control through unlisted B shares. Naspers also has a “parallel” structure, with listed N shares and unlisted A shares.
“Pick n Pay is effectively just changing from a structure which trapped the economic value for Pikwik shareholders to one that still has a difference between economic and voting control but is a much more efficient way of deriving voting control,” he said.
The development has raised the prospect of the grocer, founded in 1967, being open to a takeover.
“But I don’t think it’s a takeover target now because Pick n Pay is well on the way to recovery.” The opportunity to pick up the retailer on the cheap had passed, and “most global retailers are focusing more on their home market in the current tough economic times”, said Verster.
“I don’t think anyone is biting at the bit to buy a retailer with a significant presence in Africa.”
Altron and Altech recently got rid of their cross-shareholding structure. Just more than a year ago, the Venter family said it would relinquish management of Altron after reporting dismal results. It had decided to start the transition from a family-managed business to an independently managed structure. Control of Altron is exercised through two classes of shares that both own the operating entity.
Rex Trueform is possibly the last pyramid structure on the JSE. The listed African & Overseas Enterprises is an investment vehicle for the Shub family, and holds a 76.2% stake in Rex Trueform.
At Pick n Pay, the Holdings shares will be collapsed into Stores shares, allocated on a pro rata basis. Holdings will delist from the JSE and be wound up. The Ackerman family will be allocated a new class of unlisted voting shares (B shares) in Stores, which will ensure the Ackerman family continues to have a controlling interest in the company.
Gareth Ackerman said the family had for some time sought to unbundle the pyramid in a way that would benefit the company and all its shareholders. “I believe this proposal delivers these objectives. This type of structure is . . . more appropriate in ensuring compliance with modern corporate governance standards.”