Retailer Pick n Pay plans to replace its current pyramid ownership structure, which has long drawn the ire of shareholders.

They will now vote on July 25 to collapse the structure, Pick n Pay said.

The Ackerman family introduced the pyramid structure in 1981 to prevent a hostile takeover.

Internal policy dictates that about 75% of earnings from the operating company, Pick n Pay Stores, is paid in dividends to Pick n Pay Holdings (Pikwik). And the controlling shareholder of Pikwik, holding just over 25%, is Ackerman Investment Holdings, effectively the Ackerman family trust.

It is through control of Pikwik that the family has control of Pick n Pay Stores and ensures that just over half the dividends paid by Pick n Pay are channelled to Ackerman Investment Holdings.

According to Pick n Pay chairman Gareth Ackerman, the founding family has for some time been looking to unbundle the pyramid.

"Over time, the simpler structure should improve Pick n Pay Stores’ appeal to investors, which could in turn help our long-term growth strategy. The proposal will maintain Ackerman family voting control over Pick n Pay," he said.

In essence, the proposal will collapse the pyramid by unbundling all shares in Pick n Pay Holdings (Pikwik), with Pick n Pay Holdings shareholders receiving shares in Pick n Pay Stores on a pro rata basis.

It also means all shareholders in Pick n Pay will hold their shares in a single Pick n Pay Stores listing. Pick n Pay Holdings will delist from the JSE and will be wound up.

The new proposal will also allocate to the Ackerman family a new class of unlisted voting shares in Pick n Pay Stores — B Shares.

This will ensure that the Ackerman family continues to have a controlling interest in the company.

The Ackerman family will not vote on the proposal, nor will Pick n Pay Holdings exercise its share in the Pick n Pay Stores vote.

Pick n Pay CEO Richard Brasher said the unbundling would increase the free float in Pick n Pay Stores from 46% to 73%.

This should, over time, make the company more attractive to investors.

By unbundling Pick n Pay Holdings shares into Pick n Pay Stores, it will also eliminate the current discount between the two shares.

The family has had control of the company for almost 50 years.

Pick n Pay’s recovery plan, under CEO Richard Brasher, has shown clear signs of improvement.

Competition has increased in SA as economic conditions constrain spending and retailers scramble for market share.

While the unbundling would unlock the holding company discount, the founding family holding onto control was questionable, according to Sasfin’s Senior Retail Analyst, Alec Abraham.

“They will be issuing B shares – so the Ackerman family effectively maintains their voting rights over Pick n Pay Stores.   A lot of people are dubious of the fact that they still retain control of  Pick n Pay. Look, I don’t think its the worst thing in the world but unlike other CEOs in which Raymond Ackerman didn’t really have any confidence in…with Richard Brasher - he has been willing to let go and let him do what he needs to. So I’m a little surprised they’re still holding on. Nevertheless, the inefficient Pikwik structure falls away as they unbundle the shares to the Pikwik shareholders,” he said.

With Shaun Harris

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