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Restructure by the Pick n Pay Group of its existing Pyramid Control Structure
Pick n Pay Stores Limited
(Incorporated in the Republic of South Africa)
Registration number 1968/008034/06
Share code: PIK
ISIN code: ZAE000005443
(“Stores” 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
Pick n Pay Holdings Limited RF (“Holdings”) is currently the controlling shareholder of 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 Stores (“Independent Directors”) and the independent board of Holdings 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 sale of
Stores shares by Holdings before the unbundling as set out in more detail below) to the shareholders of Holdings on a pro rata basis (the
“Unbundling”). As part of a restructure of the Pyramid Control Structure, and inextricably linked to and conditional on the Unbundling, the
Independent Directors have resolved to create a new class of unlisted voting shares in Stores (the “B Shares”) and to issue B Shares to 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 Holdings with sufficient cash to discharge its costs and expenses, including but not limited to Transaction
expenses (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 investments
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”). 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.
Stores shareholders are encouraged to refer to the Holdings 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
The Independent Directors of Stores believe that the B Share Issuance in the context of the Transaction will be to the benefit of Stores and Stores
shareholders since:
¡ the Transaction 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 in Stores, 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 thereof 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; and
¡ the simplified structure could improve Stores’ investment appeal to both foreign and local investors which could potentially enhance its access to
equity capital and therefore its long-term growth strategy.
3. Salient terms of the B Share Issuance
3.1 B Shares
The detailed B Share terms, together with relevant extracts of the new Stores Memorandum of Incorporation (“MOI”), will be included in the circular
to be posted on 24 June 2016.
The B Shares will, subject to the fulfilment of the conditions precedent set out in paragraph 4 below, be issued to the Ackerman Family on a once-off
basis (subject to certain anti-dilution and anti-accretion provisions, to be detailed in the circular), at an initial ratio (“B Share Issue Ratio”) of 1.98061
B Shares for every 1 Stores share held by the Ackerman Family immediately post the Unbundling, equating to up to 259 682 928 B Shares to be
issued to the Ackerman Family in order to maintain their current voting position in relation to Stores.
3.1.1 Economic rights
The B Shares will be unlisted, non-convertible, non-participating, no par value shares. In addition, the B Shares issued to the Ackerman Family will
only be entitled to voting rights and will have no economic participation and, as such, will not be entitled to dividends and will have no rights on
liquidation.
3.1.2 Voting rights
The issue of the B Shares seeks to maintain the effective 52.8% voting rights held by the Ackerman Family (exclusive of treasury shares and after the
Pre-Unbundling Disposal) and do not confer any additional voting rights. The B Share Issuance will result in the maintenance of the Ackerman
Family’s 52.8% voting position in relation to Stores (exclusive of treasury shares and after the Pre-Unbundling Disoposal) without the conferring of
any additional economic benefit relative to what the Ackerman Family currently enjoys. The B Share Issuance will not lead to any economic dilution
for the minority shareholders of Stores. The voting rights attaching to B Shares may in certain circumstances, as detailed below, be adjusted upwards
or downwards to prevent undue dilutions.
Notwithstanding the fact that the economic interests of Stores shareholders will not be diluted by the B Share Issuance, their voting interests will be
diluted. This dilution flows from the fact that the B Shares issued to the Ackerman Family carry voting rights to ensure that the Ackerman Family are
able to exercise the same level of control in respect of Stores as they were prior to the Transaction.
The dilution of Stores shareholders from a voting perspective, expressed as a percentage, is 34.2% (after considering the Pre-Unbundling Disposal).
Illustrated below is a Stores shareholder’s shareholding in Stores pre and post the Transaction:
Stores shareholder’s direct economic interest in Stores 5.00% 2.50%
BEFORE THE PROPOSED TRANSACTION
Direct economic interest in Stores 5.00% 2.50%
Direct voting interest in Stores (excluding non-voting treasury shares) 5.02% 2.51%
AFTER THE PROPOSED TRANSACTION
Direct economic interest in Stores 5.00% 2.50%
Direct voting interest in Stores (excluding non-voting treasury shares) 3.30% 1.65%
3.1.3 Disposal of B Shares
The B Shares will be subject to a number of requirements.
3.1.3.1 B Shares may only be disposed of or transferred together with a corresponding number of Ordinary Shares (referred to as “Stapled Ordinary Shares”)
determined in the B Share Issue Ratio to which they are “stapled”, and vice versa in respect of the disposal of Stapled Ordinary Shares.
3.1.3.2 B Shares are unlisted and may only be transferred on written notice to the Company Secretary of Stores.
3.1.3.3 Ordinary shares (stapled to B Shares) may be disposed of or transferred off-market (outside the JSE’s normal order book) or on-market (via the JSE’s
normal order book). However, if the Ordinary Shares are disposed of on-market, the corresponding number of B Shares stapled to those Ordinary
Shares disposed of on-market will be cancelled.
3.1.3.4 Voting rights attaching to B Shares are cancelled upon disposal or transfer, subject to the following:
3.1.3.4.1 If B Shares are disposed of or transferred in circumstances where, pursuant to such transfer, both the transferor and the transferee each hold more
than 25% (twenty five percent) of the total voting rights of shareholders of Stores (together with related and concert parties), the voting rights
attaching to such B Shares shall be cancelled upon such disposal or transfer unless such transferee elects to make an offer to all other holders of
Ordinary Shares otherwise in accordance with section 123 of the Companies Act.
3.1.3.4.2 Voting rights attaching to all B Shares will be cancelled if there is no B Shareholder (whether individually or together with related and concert parties)
holding more than 25% (twenty five percent) of the total voting rights of shareholders of Stores.
3.1.3.4.3 In the event that a particular B Shareholder does not hold more than 25% (twenty five percent) of the total voting rights of Stores (together with
such B Shareholder’s related and concert parties), the voting rights attaching to that particular B Shareholder’s B Shares will cease, and Stores will be
entitled, at its election, to repurchase that B Shareholder’s B Shares at R0.00001 per share.
3.1.3.4.4 In the event of an alteration of the capital structure of or corporate action in Stores, affecting the number of Stapled Ordinary Shares, the number
of B Shares held by the B Shareholders shall be increased or decreased (as the case may be) to maintain the B Share Issue Ratio.
3.1.3.4.5 Any such increase shall be effected by allotting and issuing further B Shares to the B Shareholders for a purely nominal consideration of R0.00001.
Any decrease shall be effected by the cancellation of the voting rights attaching to the B Shares in question and conferring upon Stores the option
to repurchase such B Shares for a purely nominal consideration of R0.00001.
In circumstances where an offer to minorities is triggered, the full consideration payable to the transferor shall be attributable to the Ordinary Shares
forming the subject matter of such offer.
4. Conditions precedent to the B Share Issuance
The B Share Issuance is subject to the following conditions precedent being fulfilled, namely:
¡ the approval by Stores shareholders at the Stores general meeting of the special resolutions to (i) replace the existing Stores MOI with the new
Stores MOI incorporating therein the B Share terms, and (ii) to issue and allot the B Shares to the Ackerman Family;
¡ the Unbundling becoming effective in accordance with its terms, it being recorded that the Unbundling is subject to the following conditions
precedent being fulfilled, namely:
– approval by Holdings shareholders at the Holdings general meeting of the special resolution to unbundle the Stores shares held by Holdings in
terms of section 46 of the Income Tax Act and section 112 (read with section 115) of the Companies Act; and
– within the period prescribed by section 164(7) of the Companies Act, no demands, or valid demands which in aggregate represent less than
5% (five percent) of Holdings shares, are received by Holdings in accordance with section 115(8) of the Companies Act are made in respect of
the Unbundling.
5. Financial information relating to the Transaction
There will be no material effect on the earnings and underlying net asset value attributable to each shareholder of Stores as a result of the
Transaction.
6. Salient dates
The salient dates and times applicable to the Transaction are set out below:
2016
Record Date to determine which shareholders are entitled to receive the circular Friday, 17 June
Circulars posted to shareholders and notice convening general meeting released on SENS Friday, 24 June
Last day to trade in order to be recorded in the Stores share register in order to be eligible to attend and vote at the
general meeting Tuesday, 12 July
Record Date for shareholders to be recorded in the Stores 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 09:00 Thursday, 21 July
General meeting to be held at Pick n Pay Office Park,101 Rosmead Avenue, Kenilworth, Cape Town after the completion
of the Holdings general meeting or at 09:00 (whichever is the later) Monday, 25 July
Results of the general meeting released on SENS Monday, 25 July
The following dates assume that no court approval or review of the Unbundling is required at Holdings level
and will be confirmed in the finalisation announcement if the Unbundling becomes unconditional and all the
resolutions proposed at the general meeting are passed.
Finalisation announcement expected to be released on SENS Friday, 12 August
Expected date on which the B Shares will be issued Monday, 29 August
Note:
1. All times shown above are South African local times.
2. All dates and times in respect of the Unbundling are subject to change. The above dates have been determined based on certain assumptions regarding the Unbundling. If the relevant dates in
respect of the Unbundling change and the dates above are impacted, a change will be released on SENS and published in the press.
7. Posting of the circular
Stores shareholders are advised that a circular containing full details of the terms of the Transaction and notice of the general meeting containing
the necessary resolutions to be approved by Stores’ shareholders in order to implement the Transaction will be posted to Stores shareholders on
Friday, 24 June 2016.
8. Directors’ responsibility statement
The Stores board of directors (the “Board”) accepts responsibility for the information contained in this announcement insofar as it relates to Stores
and confirms that, to the best of its knowledge and belief, such information which relates to Stores 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 Stores
Investec Bank Limited
Legal Adviser to Stores
Werksmans Incorporated
Date: 14/06/2016 08:45:00 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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