Pick n Pay minorities oppose new structure

Pick n Pay’s annual general meeting (AGM) next week looks certain to be another humdinger as smaller shareholders vent their opposition to the proposed restructuring of the Ackerman family’s control.

Shareholders in the operating company, Pick n Pay Stores, are angry that an archaic control structure is being replaced by another contrivance that does not benefit them, but will leave them stuck with newly created B shares.

Despite the opposition, the backing of large institutional shareholders is expected to secure the outcome in the Ackermans’ favour.

Shareholders will have an opportunity to vote on plans to collapse the group’s much maligned pyramid control structure and replace it with unlisted B shares after the AGMs for Pick n Pay Holdings (Pikwik) and Pick n Pay Stores on Monday morning. The end result of the two-step transaction is that Pikwik will disappear and the Ackerman family will emerge with 52% of the voting power in Pick n Pay Stores.

Shareholders in Pikwik are delighted with the plan, as it unlocks the discount at which their shares have traded for years.

The unlocking of this discount compensates them for being treated unequally in the restructuring. Unlike the Ackerman family, they will receive none of the newly created B shares.

The B shares, which have no economic rights, will secure control of Pick n Pay Stores firmly in the hands of the family of Raymond Ackerman, who founded the company more than 50 years ago.

Shareholders in Pick n Pay Stores, particularly those not also invested in Pikwik, are far from happy, to say the least.

Activist Theo Botha, who has attended several Pick n Pay AGMs over the years and has campaigned for the dismantling of the control structure, says the proposed transaction prejudices Pick n Pay Stores.

"The result of the transaction will be to force the pyramid structure down onto Pick n Pay Stores; this is not progress." Botha says, based on their holding in Pikwik, the Ackerman family is entitled only to 26% of the votes in Pick n Pay Stores, but because of the B shares they will have 52%.

"Right now I’m invested in a company that only has ordinary shares, after this transaction my company will have two types of shares one of which will be unlisted. This creates uncertainty." Botha is also irked that Pick n Pay Stores has to carry some of the cost of a transaction that provides no benefit to the company.

One of the institutional shareholders in Pick n Pay Stores disputes the company’s claim that no one is worse off, pointing out that their voting rights have been diluted significantly by the issue of B shares. He dismisses presumed benefits of increased liquidity and says Pick n Pay Stores’ investors have received no economic benefit.

The Pikwik structure was put in place in 1981 to secure control of the group in the hands of the founding family. Shareholders expressed few concerns about it until 10 or so years ago, when Pick n Pay began to lose some of its market share and profit to its more agile competitors — Woolworths and Shoprite.