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Pepkor plans R2 billion bookbuild
Pepkor plans R2 billion bookbuild
Published Date: 2020-06-24 | Source: Stephen Gunnion | Author: Stephen Gunnion
The capital raise is just the latest in the retail sector aimed at reducing debt or funding growth opportunities created by the Covid-19 crisis.
Pepkor wants to raise over R2 billion in an accelerated bookbuild of its shares to institutional investors so it can pay down debt and provide a buffer against uncertain market conditions. It is the latest in a number of retailers planning to raise more equity capital.
The group will place up to 172.5 million shares, representing up to 4.95% of its existing shares, after shareholders approved the move at its AGM in March. At yesterday's closing price, the bookbuild would raise R2.05 billion rand.
Last week, The Foschini Group (TFG) said it planned to ask shareholders to approve a R3.95 billion rights offer to help it cut debt and take advantage of any growth opportunities. Last month, Mr Price said it would ask shareholders to give it the go-ahead to issue shares of up to 10% of its market capitalisation, which is currently around R36.6 billion.
While trading had exceeded expectations since the relaxation of lockdown rules on 1 May, Pepkor said the duration and evolution of Covid-19 and the related impact on the economy and its operations remained uncertain. It said it would use the proceeds from the placement to reduce its gearing level towards its stated target of 1x net debt-to-EBITDA (earnings before interest, tax, depreciation and amortisation). In March, its gearing ratio was 1.7 times. It said the share issue would also provide investors with an opportunity to invest in its future growth and success.
After its stores were closed due to the lockdown in April, Pepkor said sales at its PEP and Ackermans chains rebounded 40% on a like-for-like basis last month, with trading momentum continuing during the first three weeks of this month. Its Speciality business, which focuses on more discretionary adult wear and footwear, also did well, as did its consumer electronics and appliances division. Trading in The Building Company was negative as building contractors and the construction industry only reopened on 1 June. However, since then it had shown a positive trajectory. Sales in PEP Africa, which contributes around 3% of group revenue, declined by double digits in constant currencies over the three months to end-June, impacted by weakness in local economies due to Covid-19.
Pepkor's shares closed 1.3% lower at R11.87 yesterday. The announcement was made after the close of trade.
Pepkor launches accelerated bookbuild of 172ml shares. Proceeds to be used to reduce gearing and provide funding against current and future uncertainties.-- Andrew Todd (@andrewbtodd) June 23, 2020
This is now #7 I think in terms of capital raises in SA market....now Pepkor announces a new share issue of approx R2bn (follows planned capital raises from MRP, TCH, TFG, COH, SUI, CLH) https://t.co/s4akxfk7nM-- Delphine Govender (@Delphine_DG) June 23, 2020
$JSEPPH Pepkor announces bookbuild of around R2bn with the intention to reduce debt levels and support operations.-- JSE Rookie (@JseRookie) June 23, 2020
1) Our credit book provisions are rising and need further funding
2) Diluting Steinhoff shareholding begins