Tycoons ready to cede Pick n Pay voting power to lure new investors

Tycoons ready to cede Pick n Pay voting power to lure new investors Raymond Ackerman’s family is giving up some of their voting power in Pick n Pay Stores to help the struggling South African retailer woo investors.
Ackerman Investment Holdings, the family’s holding company, will reduce its voting control to below 50 percent after a planned rights offer is completed.

The move helps “change perception outside the company,” Pick n Pay’s chief executive officer Sean Summers said in an interview in Bloomberg’s Johannesburg office.The Ackerman family isn’t alone in controlling the fate of its company. Meta Platforms’ 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 Pty. “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.”

Pick n Pay’s shares have dropped 30 percent in the past year compared with a 31 percent gain in larger rival Shoprite Holdings. Pick n Pay also announced its first annual loss on record for the year ended February 25, according to data compiled by Bloomberg.

Summers, who was rehired as CEO last year, has a three-year turnaround plan including selling shares in its Boxer unit for as much as R8 billion (US$446 million) and raising R4 billion in the rights offer.

“The balance sheet was completely upside down, with a funding structure that was patently against us,” Summers, 70, said. Still, Pick n Pay finished up its initial investor roadshow for Boxer last week and “the response has been phenomenal,” he said.

The structure of founders having more voting power was common in Africa’s most-industrialised nation during years of apartheid-related isolation. Though, that’s changing now. Other tycoons have also given up their grip on the companies they founded.

Dis-Chem Pharmacies co-founder and CEO Ivan Saltzman in 2021 sold a portion of the family’s shareholding to improve liquidity in the trading of the shares — and to provide an incentive in retaining key executives.

Christo Wiese has held extra voting shares in Shoprite for more than 40 years. It was the use of this stock that ensured his re-election as chairman in 2019.

While he gave up that position a year later, the 82-year-old still sits on the board of Africa’s largest food retailer. That’s even as his economic interest dropped when he sold Shoprite shares after losing about R59 billion when Steinhoff International Holdings NV imploded in late 2017.

“A lot of our family owners in South Africa overstay their welcome,” said David Shapiro, who has more than 50 years of experience on Johannesburg’s stock exchange and is chief global equity strategist at Sasfin Securities. “Though to actually move out is a very difficult decision to make.” – Bloomberg

Wiese has argued that a significant shareholder is important when there are big decisions to be made and that “you don’t just parachute people in.”

Stephen Saad, the founder and CEO of Aspen Pharmacare Holdings, agrees. He has been key in growing Aspen into Africa’s largest drugmaker. He is the single biggest individual shareholder with about 13 percent of Aspen’s stock but doesn’t control the company through special voting shares.

While Pick n Pay expects the new structure to help lure investors, the retailer will still be closely associated with its founding family, Summers said.

“Pick n Pay is inextricably linked to the Ackermans,” he said. “For those that have an itch or irritation with the control structures, I say, Pick n Pay without the Ackermans is worse off.” – Bloomberg