Ackerman family giving up control of Pick n Pay

The Ackerman family is set to give up 3% of its voting rights to support Pick n Pay in its transformation, bringing the family’s voting share down from 52% to 49%.

This comes after the retailer proposed amending the terms and conditions attached to Pick n Pay’s B shares to permit the holders of B Shares to approve, by special resolution, a lower B Share Issue Ratio.

This is the ratio of the B Shares held by B Shareholders to certain of their Pick n Pay ordinary shares. 

These amendments were approved at the meeting of Pick n Pay ordinary shareholders and B Shareholders, respectively, held on 26 June 2024.

This move is also related to Pick n Pay’s recent capital raise, whereby the retailer raised R4 billion in capital with a high subscription rate and overwhelming market support. 

The retailer said in a SENS announcement on Monday, 5 August, that the Rights Offer was 106% oversubscribed, with total subscriptions reaching over R8 billion.

It said 98.7% of shareholders followed their rights, and the retailer received R4.3 billion in excess applications.

The proceeds of the Rights Offer will be used to pay down debt, stabilise the balance sheet, and invest in Pick n Pay’s turnaround strategy, which CEO Sean Summers is driving rapidly.

In a SENS announcement released on Tuesday, 13 August 2024, Ackerman Investment Holdings and its related and inter-related persons followed their rights in full in respect of all their Ordinary Shares.

This included both Ordinary Shares, which are stapled to B Shares, and Ordinary Shares, which are not stapled to B Shares. 

As the Ackerman Family Group followed their rights in full in respect of their Stapled Ordinary Shares, an “Adjustment Event” occurred.

This entitled the B Shareholders – in this case, the Ackerman Family Group – to be issued with such number of additional B Shares as is required to maintain the B Share Issue Ratio.

Prior to the implementation of the Rights Offer, this ratio was 1.98061 B Shares for every 1 Stapled Ordinary Share held by the B Shareholders.

Pick n Pay said in its latest announcement that it has been informed that the Ackerman Family Group has agreed to implement a reduction in the percentage of voting rights that it, in the aggregate, is able to exercise in Pick n Pay.

The family decreased its voting rights from 52.00% before the Rights Offer to 49.00% after the Rights Offer. 

“The 3.00% reduction in voting rights has been undertaken to support Pick n Pay in its transformation,” the retailer explained. 

Therefore, considering the number of Ordinary Shares the Ackerman Family Group now holds after the rights offer, the retailer said it must issue new B shares to meet its Target Voting Threshold.

Now, the adjusted B Share Issue Ratio is 1.64254 B Shares for every 1 Stapled Ordinary Share held by B Shareholders after the Rights Offer.

“The B Shareholders unanimously approved the Adjusted B Share Issue Ratio by written resolution adopted on 8 August 2024,” the retailer said.

This follows an announcement earlier this year that the Ackerman family is giving up some of their voting power in Pick n Pay to help the struggling South African retailer attract investors. 

The move helps “change perception outside the company”, Pick n Pay’s CEO Sean Summers told Bloomberg.

Bloomberg explained that the Ackerman family isn’t alone in controlling the fate of its company. 

For example, Meta’s Mark Zuckerberg and Alphabet’s founders have huge sway over their firms through dual-class shares that give them greater voting rights than the other.

Many investors abhor such a structure, which raises corporate governance concerns. Johann Rupert, South Africa’s richest man, controls Richemont through a similar setup. 

“The appalling performance of Pick n Pay over a decade is good evidence then that family control is not always a good idea,” said Shane Watkins, chief investment officer at All Weather Capital.

“The problem with control structures is it allows pretty much one person to make the important calls, and if they get it wrong, there can be very serious consequences.”