Reform, under family control
WHILE the simplification of its shareholder structure still leaves the Ackerman family in control of the 49-year-old retailer, it does aid its modernisation and turnaround process.
Pick n Pay CEO Richard Brasher said collapsing the pyramid structure removed a lot of distraction and debate about the structure.
“It will modernise and simplify Pick n Pay by creating a single, unified structure. It will increase the free float in [Pick n Pay] Stores from about 46% to around 73%. This should over time make the company more attractive to investors. By unbundling [Pikwik] Holdings shares into Stores, it will also eliminate the current discount between the two shares.”
It is through control of Pikwik Holdings that the family has had control of Pick n Pay Stores, ensuring that 25%-26% of the dividends paid are channelled to its investment holding company. The Ackerman family holds 48.5% of Pikwik, through Ackerman Investment Holdings. The company in turn controls 52.7% of operating company Pick n Pay Stores.
In effect, the Pikwik management ensures outright control of Pick n Pay for the Ackerman family with an economic interest of only 26%.
Chris Logan of Opportune Investments has been one of the most outspoken critics of Pick n Pay’s pyramid structure.
“They’re eliminating the structure, unlocking the discount and improving tradability,” he said. “I’m delighted. It’s a very positive move, but I guess in a utopian society you would want one share, one vote.”
Logan said the group put together a committee of nonexecutives to assess the pyramid structure about two years ago. “Maybe you want to say it’s smoke and mirrors, but it’s more than that. Coupled with good operational performance, it seems as if there’s been a genuine transformation.”
Logan is interested in pyramids and, as a minority shareholder, played a role in the collapsing of the Liberty Holdings structure, used by Standard Bank to maintain artificial majority control of Liberty Life.
But shareholder activist Theo Botha does not believe the collapse of the pyramid “makes any difference whatsoever”.
He said: “Why should Stores shareholders give the Ackerman family additional rights by allocating them B shares, which will ensure that they maintain control, without receiving any form of compensation for this?”
The real reason behind the decision, Botha argued, was cost. “[It’s] become so expensive for them. That’s the real reason they’re doing this.”
The dual-listed pyramid structure will be replaced by a single structure. “This reduces administration and cost for the company,” said David North, group executive, strategy and corporate affairs, at Pick n Pay.
“It should over time lead to Pick n Pay being included in more share indices, which should increase the attractiveness of the stock to investors.
[It’s] become so expensive for them. That’s the real reason they’re doing this
The simplified structure will also make raising capital easier.
“We see it as part of the modernisation of the company. Some shareholders and investors have been saying for a while that the pyramid is outdated. The Ackerman family has come forward with a proposal which unbundles the pyramid, while retaining their control of the company, and benefits shareholders.”
Absa Wealth & Investment Management’s Chris Gilmour said most shareholders were not interested in control of the company. “The actual control side is probably not that relevant unless you’re the family. Holistically, they’ve got control and improved the tradability.”
The discount between Holdings and Stores reduced on the day of the announcement. Shares in Holdings leapt 13.5% after hitting a record high of R33 during intraday trade, while Stores fell just over 2%.