Dis-Chem raises R1.1bn but sentiment sours on news of executive sales

CEO Ivan Saltzman, executive Stan Goetsch and director Niall Hegarty sold 32-million shares. Pharmacy group Dis-Chem has raised R1.1bn to fund its expansion, but the news failed to impress shareholders.

The company’s share price dropped as much as 14% after it disclosed the details of its capital-raising programme.

Dis-Chem chief financial director Rui Morais said the capital raised was a “wealth diversification method” for some of the original shareholders.

As part of the bookbuild, senior Dis-Chem executives Ivan Saltzman, Stan Goetsch and Niall Hegarty sold altogether 
32-million ordinary shares at R35 per share. After the transaction Saltzman, Goetsch and Hegarty own 52.7%, 6% and 3.2%, respectively, in Dis-Chem.

Investment analyst at Sanlam Private Wealth Renier de Bruyn said that given the size and liquidity of the company, it was an astute move for Dis-Chem to conduct such a capital raise.

Equity analyst at JM Busha Group Simbarashe Chimanzi concurred, saying that the accelerated bookbuild was necessary as it opened free float and added liquidity to the share, but the market was not impressed because of the level at which the bookbuild was done.

“I assume the market believes the share should be trading around the R34/R35 level, closer to the level the bookbuild was done,” he said.

De Bruyn attributed the dip in the share price to nervousness on the part of investors owing to the fact that founding shareholders were the ones selling shares.

With a market capitalisation of over R33bn, Dis-Chem has had a solid performance in 2017. The pharmacy group aims to open 200 stores by 2023.

Analysts are confident that profit management will remain strong and market-share gains will continue, particularly at the expense of the smaller independent pharmacies.