Pick n Pay not exactly a bargain for suitors
MANY European retailers have been linked in recent weeks to the rumoured acquisition of Pick n Pay, still a leading supermarket chain despite its difficulties. A few weeks ago Dutch retailer Royal Ahold was mentioned. Two months before that it was UK giant Tesco. Others have hinted at a US private equity deal.
But one has to wonder just how much European retailers, which aren’t exactly cash flush, can afford to pay for the grocer. Pick n Pay is among the top three in SA and, despite having had a torrid couple of years, is poised for solid growth in the rest of Africa.
Stagnant sales in the UK and Europe over the past few years mean retailers there are being forced to consider emerging market expansion, but their balance sheets may not be as accommodative as their strategies are ambitious.
Pick n Pay, given its brand presence (minus the operational difficulties it faces), wouldn’t exactly be a cheap buy as far as executive chairman Gareth Ackerman is concerned. The company doesn’t see itself as prey, so any potential predator is likely to be confronted by a hefty difference in valuation opinions even before the first meeting.
Ratings agency Fitch recently affirmed Pick n Pay’s credit ratings, with a stable outlook. But it acknowledged the company had been slow to identify and adapt to changes in the market and that its competitive position had weakened.
Pick n Pay has been without a CEO for nearly eight months, although an appointment is said to be imminent. Interim results are due in about two weeks. Will shareholders be satisfied with another lacklustre performance and the promise of better things to come, or are they looking for a white knight?
SA IS set to miss out on the fruits of one the most promising companies to list on AltX. Poynting, an antenna manufacturer, has decided to manufacture a large portion of its products in China.
SA will almost certainly lose jobs in a sector the government has identified as one with the potential to create employment.
Poynting’s defence division is transferring the manufacturing of more of its largest-volume antenna products to China. “We have built valuable relations and acquired rare experience in the past three years where we have been engaged in outsourced manufacture to China,” the company said.
In the year to June, diluted headline earnings per share rose 150%, to 8.04c from 3.21c. But Poynting’s defence division performed poorly. CEO Andre Fourie said the division had seen less business during the year. But many industries worldwide face a lack of demand, so Poynting’s problem is not unique.
It will be difficult for SA to reduce unemployment if this lack of economic activity means jobs being exported to China — especially if we keep sending the wrong political message to potential investors.
Dave Marrs edits Company Comment (marrsd@bdfm.co.za)