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Restructure by the Pick n Pay Group of its existing Pyramid Control Structure
Pick n Pay Holdings Limited RF
(Incorporated in the Republic of South Africa)
Registration number 1981/009610/06
Share code: PWK
ISIN code: ZAE000005724
(“Holdings” or the “Company”)
Restructure by the Pick n Pay Group of its existing Pyramid Control Structure
1. Introduction and key features of the restructure of the Pyramid Control Structure
Holdings is currently the controlling shareholder of Pick n Pay Stores Limited (“Stores”) and Holdings’ shareholding in Stores is its only investment and
source of income. Ackerman Investment Holdings Proprietary Limited and other entities related to members of the Ackerman Family (together,
“Ackerman Family”) are, in turn, the holders of the majority of the issued shares in Holdings. Accordingly, the Ackerman Family currently has effective
control of Stores through a majority shareholding in Holdings. This structure, which exists for historical reasons, constitutes the Pick n Pay Group as a
Pyramid Control Structure in an environment where such structures are no longer encouraged by the JSE Limited (“JSE”).
The independent board of directors of Holdings (“Independent Board”) and the independent board of directors of Stores have resolved to restructure
the Pyramid Control Structure by unbundling Holdings’ entire circa 52.7% shareholding in Stores (inclusive of treasury shares and before any disposal
of any Stores shares by Holdings pre the unbundling as set out in more detail below) to the shareholders of Holdings on a pro rata basis (the
“Unbundling”). As part of the restructure of the Pyramid Control Structure, and inextricably linked to and conditional on the Unbundling, a new class
of unlisted voting shares will be created by Stores (the “B Shares”) and issued to the Ackerman Family in order for the Ackerman Family to maintain the
effective voting rights that they currently hold in Stores through their shareholding in Holdings (the “B Share Issuance”). The Unbundling and the
B Share Issuance are hereinafter collectively referred to as the “Transaction”. Holdings will dispose of 300 000 Stores shares prior to the Unbundling, in
order to provide the Company with sufficient cash to discharge its costs and expenses, including expenses associated with the Transaction (the “Pre-
Unbundling Disposal”).
Subsequent to the Unbundling, which constitutes a disposal by Holdings of its only investment, Holdings will be an empty shell, having no assets other
than the cash required to discharge its costs and expenses, save as expressly provided below, and all of the issued shares of Holdings will be acquired
by Stores by way of a scheme of arrangement (the “Scheme”), as contemplated in sections 114 and 115 of the Companies Act 71 of 2008 (the
“Companies Act”) for a nominal value. After the Scheme and in due course, Holdings will be delisted (the “Delisting”) from the JSE. To the extent that
Holdings may have any surplus cash, over and above the cash required to discharge its costs and expenses, this surplus will form part of the net asset
value of Holdings, factored into the above mentioned Scheme consideration, and accordingly any such surplus amounts will be payable to Holdings
Shareholders upon implementation of the Scheme.
Key features of the Transaction include:
¡ in the interests of good corporate governance and in agreement with the JSE and the Takeover Regulation Panel established in terms of section 196
of the Companies Act (“TRP”), (i) the Ackerman Family will not vote their Holdings shares on the resolutions to be proposed at the general meeting
of Holdings to approve the Unbundling, and (ii) Holdings will not vote its Stores shares on the resolutions to be proposed at the general meeting of
Stores to create the B Shares by way of an amendment to the Company’s MOI, and to give effect to the B Share Issuance;
¡ the Unbundling and the B Share Issuance are fully inter-conditional;
¡ the Scheme is conditional on the Transaction becoming operative and effective. However, the Transaction can proceed without the Scheme being
implemented;
¡ the Ackerman Family will retain their current level of effective voting control in Stores through the B Share Issuance. The restructure of the Pyramid
Control Structure will simply result in all Holdings shareholders, including the Ackerman Family, holding their interests in Stores directly as opposed
to indirectly through a shareholding in Holdings;
¡ no Holdings shareholder or Stores shareholder will suffer any economic dilution as a result of the implementation of the Transaction; and
¡ while Holdings minority shareholders currently have no direct vote in Stores, on the implementation of the Unbundling they will become Stores
shareholders entitled to vote Stores shares.
The overwhelming majority of shareholders canvassed in respect of the Transaction, as permitted by the TRP, were supportive thereof.
Holdings shareholders are encouraged to refer to the Stores Stock Exchange News Service (“SENS”) announcement, which has been released
simultaneously with this announcement, so as to gain a better understanding of the Transaction and its impact on both shareholders of Holdings and
shareholders of Stores.
2. Rationale for the Transaction
2.1 Rationale for the Unbundling
The Independent Board believes that the Unbundling in the context of the Transaction will be to the benefit of Holdings and Holdings shareholders
since:
¡ it will result in the elimination of the pyramid structure, thereby removing the multiple entry points to Stores, while retaining the stability and
continuity of an anchor shareholder through the maintenance of the Ackerman Family’s effective interest in Stores;
¡ the Unbundling is expected to result in an increased free float of Stores shares, which will enhance the weighting of Stores shares in stock market
indices both on the JSE and internationally. The higher levels of free float and enhanced weighting in stock market indices is likely to improve the
demand, liquidity and marketability of the Stores shares;
¡ it is anticipated that the Unbundling may unlock value for Holdings shareholders and, through the elimination of associated listings costs, is likely to
facilitate Holdings Shares (which will become Stores shares) trading at their intrinsic value; and
¡ the simplified structure is likely to improve Stores’ investment appeal to both foreign and local investors, potentially enhancing its access to equity
capital and therefore its long-term growth strategy.
2.2 Rationale for the Scheme and Delisting
After the Unbundling through a pro rata distribution in specie of its Stores shares, Holdings will be a shell, having no assets other than the cash required
to discharge its costs and expenses, save as expressly provided above, with no commercial purpose. Holdings shareholders will have received shares in
Stores, and shares in Holdings will no longer be of any material value. It is accordingly envisaged that Holdings will be wound-up.
The Scheme will facilitate an orderly, effective and efficient winding-up of Holdings without impacting on the other aspects of the Transaction. After
the successful implementation of the Scheme, Holdings will no longer qualify for listing and will be delisted in accordance with section 1.16(b) of the
JSE Listings Requirements (“Listings Requirements”).
2.3 Rationale for the B Share Issuance
The B Shares to be issued to the Ackerman Family have no economic rights in that they will not enjoy any rights to dividends or distributions, nor any
rights to proceeds in the event of a winding up or liquidation, but will carry only voting rights which will ensure that the Ackerman Family maintains
the effective voting rights that they currently hold in Stores through their shareholding in Holdings. The terms attached to the B Shares are more fully
explained in the Stores SENS announcement released simultaneously with this announcement.
The Unbundling together with the B Share Issuance will not result in the effective economic interests of Holdings shareholders in Stores, through their
holding of shares in Holdings, being diluted in any way. Holdings shareholders will simply hold such interest directly as opposed to indirectly.
Notwithstanding the fact that the economic interests of Holdings shareholders are not diluted as a result of the issuance of the B Shares to the
Ackerman Family, the voting rights of Holdings shareholders (which are currently notional as Holdings shareholders cannot directly vote at Stores level)
at a Stores level will, effectively, be diluted. On the Unbundling becoming effective, shareholders of Holdings will become direct shareholders of Stores
entitled to vote at meetings of shareholders of Stores (“Stores Shareholder Meetings”). The votes which Holdings shareholders will be entitled to
exercise at Stores Shareholders Meetings will effectively be less than the votes they would currently have if they were able to exercise votes at Stores
Shareholder Meetings based on their effective interest in Stores (through their shareholding in Holdings). The dilution, expressed as a percentage, is
35.9% (after considering the Pre-Unbundling Disposal).
Illustrated below is a Holdings shareholder’s indirect and direct shareholding in Stores pre and post the Transaction, respectively:
Holdings shareholder’s direct economic interest in Holdings 5.00% 2.50%
BEFORE THE PROPOSED TRANSACTION
Indirect economic interest in Stores 2.63% 1.32%
Indirect voting interest in Stores (excluding non-voting treasury shares) 2.71% 1.35%
AFTER THE PROPOSED TRANSACTION
Direct economic interest in Stores 2.63% 1.32%
Direct voting interest in Stores (excluding non-voting treasury shares) 1.74% 0.87%
The economic interests of the Ackerman Family will not change as a result of the Transaction and, in this regard, they will be in the same position as all
other Holdings shareholders. However, they will not suffer the same dilution as other Holdings shareholders from an effective voting perspective as a
result of the issue of B Shares to them so as to ensure that they retain the same level of effective voting control as they currently enjoy in Stores. The
Ackerman Family, unlike other Holdings shareholders, are currently able through their control of Holdings to direct how Holdings exercises the votes
attaching to the Stores shares which Holdings holds at Stores Shareholder Meetings. The Ackerman Family therefore currently enjoy a voting position
in Stores which other Holdings shareholders do not and such position is being preserved through the B Share Issuance.
3. Salient terms
3.1 Unbundling
Holdings will, subject to the fulfilment of the conditions precedent set out in paragraph 4.1 below, distribute the Stores shares held by it to Holdings
shareholders in the entitlement ratio of 0.48752 Stores shares for every 1 Holdings share held on Friday, 26 August 2016 (the “Record Date”).
3.2 Scheme
Stores will, subject to the fulfilment of the conditions precedent set out in paragraph 4.2 below, acquire all of Holdings’ shares at a consideration of the
greater of R0.00001 per Holdings share (rounded up in aggregate to the nearest cent) or the net asset value of Holdings immediately after the
Unbundling, for the avoidance of doubt, including the proceeds of the 300 000 Stores shares to be sold prior to the Unbundling and excluding any
provision for expenses relating to the Transaction and the Scheme, expressed on a per share basis.
Holdings has appointed the Independent Board to consider and express its view on the Scheme and the Unbundling in the circular to be posted to
shareholders on 24 June 2016.
3.3 Delisting
Subject to the fulfilment of the conditions precedent detailed in paragraph 4.1 and 4.3 below, the listing of the Holdings shares will be suspended from
trading on the JSE at the commencement of business on Wednesday, 24 August 2016 and Holdings will delist from the “General Retailers” sector of
the JSE, with effect from the commencement of business on Tuesday, 30 August 2016.
4. Conditions precedent
4.1 Unbundling
The Unbundling is conditional upon the following conditions precedent being fulfilled:
4.1.1 the approval by the respective Holdings and Stores shareholders of the resolutions required to implement the Transaction in accordance with the JSE
Listings Requirements and the Companies Act; and
4.1.2 no Holdings shareholders giving notice objecting to the Unbundling by way of the special resolution for the section 112 disposal as contemplated in
section 164(3) of the Companies Act or, to the extent that such notice is given, it is given by shareholders holding not more than 5% (five percent)
of all Holdings shares.
4.2 Scheme
The Scheme is conditional upon the following conditions precedent being fulfilled:
4.2.1 the conditions precedent described in paragraph 4.1 above; and
4.2.2 the approval by Holdings shareholders of the resolution required for Stores to acquire all of Holdings’ shares from Holdings shareholders pursuant to a
scheme of arrangement as contemplated in section 114 (read with section 115) of the Companies Act.
4.3 Delisting
The Delisting will occur if the Scheme becomes operative. If the Scheme does not become operative but the Transaction (i.e. the Unbundling and the
B Share Issuance) is implemented, Holdings will not have any assets and will not qualify for a listing and, as such, the listing of Holdings on the JSE will
be suspended.
5. Financial information relating to the Unbundling
Holdings will be unbundling all or the greater part of its investments, being 257 045 344 Stores shares (after the Pre-Unbundling Disposal), to Holdings
shareholders on a pro rata basis. Furthermore, pursuant to the Unbundling, Holdings’ only asset will be such amount of cash as it requires to discharge
its costs and expenses. Accordingly, there will be no material effect on the earnings and underlying net asset value attributable to each shareholder as
a result of the Unbundling.
6. Salient dates
The salient dates and times applicable to the Transaction are set out below:
2016
Record Date to determine which Holdings shareholders are entitled to receive the circular Friday, 17 June
Circulars posted to Holdings shareholders and notice convening general meeting released on SENS Friday, 24 June
Last day to trade in order to be recorded in the Holdings share register in order to be eligible to attend and vote at the
general meeting Tuesday, 12 July
Record Date for Holdings shareholders to be recorded in the Holdings share register in order to be eligible to attend and
vote at the general meeting Friday, 15 July
Recommended last day to lodge Forms of Proxy for the general meeting by 08:30 Thursday, 21 July
General meeting to be held at Pick n Pay Office Park,101 Rosmead Avenue, Kenilworth, Cape Town at 08:30 on Monday, 25 July
Results of the general meeting released on SENS Monday, 25 July
If (i) all of the resolutions relating to the Unbundling and the Scheme are passed by the requisite majority of
Holdings shareholders at the General Meeting, and (ii) all of the resolutions required to give effect to the
Transaction are passed by Stores shareholders at the Stores general meeting:
Last day for Holdings shareholders who voted against the Unbundling and/or Scheme to require Holdings to seek court
approval for the Unbundling and/or Scheme in terms of section 115(3)(a) of the Companies Act Monday, 1 August
Last day to send notice of adoption of special resolutions to dissenting Holdings shareholders, in accordance with
section 164 of the Companies Act (see note 3) Monday, 8 August
Last day for Holdings shareholders who voted against the Unbundling and/or Scheme to apply to court for leave to apply
for a review of the Unbundling and/or Scheme in terms of section 115(3)(b) of the Companies Act Tuesday, 6 September
Receive compliance certificate from the TRP Wednesday, 10 August
Finalisation announcement expected to be released on SENS Friday, 12 August
Expected last day to trade in Holdings shares in order to participate in the Unbundling and the Scheme Tuesday, 23 August
Holdings shares expected to be suspended on JSE trading system Wednesday, 24 August
Holdings shareholders can trade their entitlement to Stores shares Wednesday, 24 August
Announcement on SENS of specified ratio apportionment and fractional amount payment Thursday, 25 August
Expected Record Date on which Holdings Shareholders must be recorded in the Register to participate in the Unbundling
and Scheme Friday, 26 August
Expected Operative Date of the Unbundling and the Scheme Monday, 29 August
Dematerialised Holdings shareholders accounts at CSDP or broker updated and credited Monday, 29 August
Certificated Holdings shareholders will have their new share certificates and Scheme consideration posted if Forms of
Surrender and Transfer have been received by the transfer secretaries on or before 12:00 on the Record Date (See note 4) Monday, 29 August
Expected termination of the listing of Holdings shares at commencement of trade on the JSE Tuesday, 30 August
Notes:
1. All times shown above are South African local times.
2. The above dates and times are subject to amendment. Any material amendments will be released on SENS and published in the press.
3. Holdings will send the required notice to objecting Holdings shareholders, if any, in terms of section 164(4) of the Companies Act on Monday, 8 August 2016, but the last day for sending this notice
is ten business days after the date of the general meeting.
4. Certificated Holdings shareholders whose Holdings Share certificates and duly completed Forms of Surrender and Transfer are received by the Transfer Secretaries after 12:00 on Friday, 26 August 2016
will have their Scheme consideration transferred to them by electronic funds transfer if they have stipulated a valid bank account for this in the Form of Surrender and Transfer, or, failing that posted
to them by registered post, at their own risk, within five business days of such receipt.
5. Share certificates in Holdings may not be dematerialised or rematerialised after Tuesday, 23 August 2016.
6. It is possible for the Transaction to proceed and be implemented but not the Scheme if the Scheme conditions precedent (as detailed in paragraph 4.2 above) are not met.
7. Posting of the circular
Holdings shareholders are advised that a circular containing the full details of the terms of the Transaction and notice of the general meeting containing
the necessary resolutions to be approved by the Holdings shareholders in order to implement the Transaction, will be posted to Holdings shareholders
on Friday, 24 June 2016.
8. Directors’ responsibility statement
The board of directors of Holdings (the “Board”), including the Independent Board, accepts full responsibility for the information contained in this
announcement insofar as it relates to Holdings and confirms that, to the best of its knowledge and belief, such information is true and correct and the
announcement does not omit anything which would make any statement in the announcement false or misleading.
By order of the Board
Cape Town
13 June 2016
Rand Merchant Bank, a division of FirstRand Bank Limited
Financial Adviser and Merchant Bank to the Ackerman Family and Transaction Originator and Coordinator
Edward Nathan Sonnenbergs
Legal Adviser to the Ackerman Family and Transaction Originator and Coordinator
Adviser and Transaction sponsor to Holdings
Investec Bank Limited
Legal Adviser to Holdings
Werksmans Incorporated
Date: 14/06/2016 08:44:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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