Pick n Pay will exit Nigeria by selling its 51% stake in a joint venture, as stated by CEO Sean Summers. The company has two stores in Nigeria and plans to raise funds through an IPO for its Boxer chain, with anticipated proceeds of R6 to R8 billion. The IPO will include an overallotment option to manage demand and stabilize prices, forming part of a strategy to reduce debt and improve operations.
Pick n Pay, the South African grocery retailer, has announced its decision to exit the Nigerian market by divesting its 51% stake in a joint venture. This strategic move, as articulated by CEO Sean Summers, forms part of the company’s broader plans to restructure its operations outside of South Africa. The retailer has established two stores in Nigeria in under five years, having initiated its market entry through a collaboration with A.G. Leventis (Nigeria). Additionally, Pick n Pay is in the process of listing its discount grocery chain, Boxer, on the Johannesburg Stock Exchange via an initial public offering (IPO). The company indicated that the base size of the IPO would approach the upper limits of its previously issued guidance, with estimated proceeds ranging from R6 billion to R8 billion (approximately $339 million to $452 million). Furthermore, the IPO will offer an overallotment option, allowing underwriters the ability to issue additional shares if demand exceeds expectations, thus aiding price stability. The proceeds from the IPO are integral to Pick n Pay’s two-step recapitalization strategy, aimed at generating essential funds to reduce its debt and enhance the performance of its core supermarket operations that have been operating at a loss. Moreover, the company aims to ensure that Boxer’s market valuation accurately reflects its superior growth and returns on invested capital.
The decision by Pick n Pay to exit from Nigeria highlights the challenges faced by international retailers in adapting to complex market dynamics outside their home countries. The retailer’s initial foray into the Nigerian market through a partnership was part of an ambitious growth strategy, but the subsequent decision to divest indicates a need to focus on domestic operations and profitability. In parallel, the proposed IPO for Boxer stands as a dual effort to raise much-needed capital amidst a restructuring initiative, marking a significant phase in the company’s business strategy to stabilize and enhance its financial standing.
In conclusion, Pick n Pay’s exit from Nigeria reflects a strategic pivot towards strengthening its core operations back in South Africa. This decision, alongside the planned IPO for Boxer, underscores the retailer’s commitment to restructuring its business model, reducing debt, and optimizing performance in a competitive retail landscape. The overall strategy aims to ensure that its ventures are sustainable and adequately valued in the market, aligning with the company’s long-term growth objectives.
Original Source: www.sabcnews.com
