PnP's structure of discontent

Governance at Raymond Ackerman's Pick n Pay is under the spotlight after the retail doyen came under pressure at last week's AGM to dismantle the structure through which his family controls the company.

Ackerman was resolute that the pyramid would remain in place in the interests of his “family business”. Through the pyramid, the Ackerman Family controls 48,3% of Pick n Pay Holdings (Pikwik), and it in turn controls 50,8% of Pick n Pay Stores.

This explanation won't have placated shareholders like Chris Logan or Theo Botha, whose activism efforts were rewarded last month when Standard Bank said it would pay R4,4bn to effectively dismantle its Liberty Life pyramid.

Last week, Logan and Botha attended the annual general meeting of both Pick n Pay stores and Pikwik, where they met a defiant Ackerman.

But minority shareholders could see greater value if the pyramid was dismantled. This could unlock the 12,2% discount between the level of Pikwik's shares, and the higher value of Pick n Pay Stores shares.

Independent directors at a company should ensure minority shareholders don't get a raw deal — especially in the case of a pyramid.

The King code on governance also states that a company should have a majority of independent directors to look after the interests of minorities.

But there aren't enough independent directors at Pick n Pay Holdings — if any at all. The company says it has two “independent non-executives” in Hugh Herman (Investec's chairman) and René de Wet on its six-man board, but both are seen as far too close to Ackerman to be truly independent.

Herman joined Pick n Pay in 1976, and rose to the position of MD until he left to form Investec in 1993, while De Wet has been with Pick n Pay since 1975.

De Wet admits that Pick n Pay Holdings does not at present have a “properly constituted board”.

"Pikwik does not have a fully functional board right now, but chairman Gareth [Ackerman] wants to establish it with the required majority of independent nonexecutives. But that will take some time,” he says.

When it comes to whether he and Herman should be considered independent, De Wet says: “We've got to look at those things.

“If there is any way, due to my association with Raymond, that I wouldn't qualify as an independent nonexecutive, then I'll resign. But when I talk to [Pick n Pay stores directors] they say it's valuable to have my experience here,” he says.

De Wet says he sees “value” in the pyramid structure.

“It takes pressure off the family. I have great belief in the Ackerman family controlling Pick n Pay in terms of stability and passion,” he says.

But Botha asks: “How can you have a situation where the company says this pyramid is good for all shareholders, yet you have no truly independent directors ensuring minority investors aren't prejudiced?”

Source: Financial Mail

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