South African retailer Pick n Pay, which is listing its discount grocery chain Boxer in Johannesburg through an initial public offering, said that the base size of the IPO would be towards the upper end of its guidance.
Pick n Pay previously said proceeds from the IPO could be between 6 billion rand and 8 billion rand (€310 million and $420 million).
The retailer said in a statement that the Boxer IPO would include an overallotment option, which was not expected to exceed 500 million rand (€26 million) and would be settled through the issuance of new shares.
An overallotment option grants the underwriter the right to sell more shares than originally planned if demand proves higher than expected. It provides price stability.
Recapitalisation Plan
The IPO is part of Pick n Pay's two-step recapitalisation plan for much needed cash to lower its debt and fix its loss-making core Pick n Pay supermarkets business.
The group also wants Boxer to be accorded a market value which appropriately reflects its "superior" growth and return on invested capital.
"We've been able to obtain unsecured committed term debt and working capital facilities for the Boxer business post the IPO" from funding partners, group chief financial officer Lerena Olivier told investors.
Boxer said it has an expected gross drawn term debt of up to 850 million (€44.4 million) rand and about 2 billion rand (€100 million) of working capital facility.
Controlling Stake
Pick n Pay will retain a controlling stake in Boxer, Olivier added.
The company targets a dividend pay-out ratio of 40% of Boxer group headline earnings, it said.
Boxer, with 489 stores, is South Africa's fastest growing discount grocery chain, with about 68% market share of the discount grocery retail market.
As part of its strategy to grow, Boxer is actively pursuing store expansion, including rollouts to untapped areas, developing its suite of value-added services and expanding its supply chain with additional distribution centres where necessary to support new stores, it said.
For its 2025 financial year, Boxer forecasts turnover growth of about 10%-12%, and mid-teens growth in the next three to five years. It aims to double turnover within five years, the retailer added.
In the 26 weeks ended 25 August, turnover rose by 12% to 19.8 billion rand, it said, while its trading profit increased by 11.8% to 809 million (€42.3 million) rand.
