Grocery chain Boxer has launched its share offer, aiming to raise between ZAR 8.0 billion ($440 million) and ZAR 8.5 bn ($467m). Although it is described as an initial public offer (IPO), participation is by qualified investors. The offer opened on 11 November 2024 and will close at 12:00 noon (South African time) next Friday, 22 November. This article is not a promotion, see disclaimer below.

It is the biggest IPO in Africa this year, according to Bloomberg, who also reported that demand was already overwhelming the offer within the first hours.

Boxer Retail Ltd aims to list on the Main Board of the Johannesburg Stock Exchange (JSE) on 28 November and to have a secondary listing on the A2X. Full details of the Offer are set out in the Pre-Listing Statement available on the investor relations websites of Boxer and Pick n Pay.

Boxer is a wholly-owned subsidiary of the Pick n Pay Group. It has 500 stores and the Pick n Pay press release of 11 November describes Boxer as “South Africa’s fastest-growing grocery chain” and says the chain plans to add 65 new stores by the end of this financial year, with the medium- to long-term aim of doubling its number of stores by opening 60 to 70 each year for the next six to seven years.

According to the abridged pre-listing statement, the offer will be for up to 190,476,191 subscription shares and, if there is sufficient demand, 11,904,762 overallotment shares in a greenshoe option, bringing the total to 202.4m Boxer shares (up to 40.3% of its total issued share capital) at a share price of between ZAR 42 and ZAR 54 per share. The final offer price and final number of offer shares will be released on Monday 25 November.

Pick n Pay expects to retain a majority stake in Boxer of approximately 60% to 65% post-IPO. It implies a total market capitalization for Boxer of between ZAR 21.1 bn and ZAR 24.7 bn.

The joint global coordinators and bookrunners of the offering are Rand Merchant Bank, Morgan Stanley, Absa Group Ltd. and Standard Bank Group Ltd.

Fastest growing grocer

According to the Pick n Pay announcement: “Boxer Superstores is the pre-eminent discount grocery retailer in South Africa with an annual turnover of ZAR 37.4 bn and trading profit of ZAR 2.1 bn (FY2024) and a store estate of 489 (at August 2024).

“Boxer has a 47-year history and track record of consistent growth since Pick n Pay’s acquisition of the business in 2002 under the leadership of then-CEO Sean Summers, when it had just 35 stores and annual sales of ZAR 800m.

“Its ‘soft discounter’ proposition in the South African market has secured it a share of approximately 68% of the discount grocery retail market and an estimated market share of 4.2% of the formal grocery market, more than double that of its closest competitor, estimated at 1.8%.

“Boxer grew its turnover at a South African market-leading CAGR of 18.6% between FY2022 and FY2024, with like-for-like growth of 7.7%, as a result of its compelling customer value proposition and accelerated store rollout programme.

“One of Boxer’s strengths is its deep understanding of its customers across the lower-to-middle-income communities of South Africa and Eswatini. This deliberate and clear market positioning has enabled strong like-for-like sales growth over many years in very challenging circumstances. Its 3,000 essential food and grocery products, including high-quality fresh meat, produce, and baked goods, are focused on value while incorporating quality confined labels, currently contributing 19% to sales.”

Boxer CEO Marek Masojada says the business has been growing consistently, underpinned by a strong brand, unbelievable customer offer and an execution-focused team: “Our turnover growth has been achieved in the most competitive of trading environments, reflecting the coming of age of the Boxer brand. The brand’s success is recognition of how we’ve served our customers, the robust business model we have built and most importantly, our ability to trade successfully against other competitors and formats.

“Boxer started off as more of a rural or smaller town operator in towns like Matubatuba, Nqutu, Ulundi, and Burgersfort. We continue to open stores in similar under-serviced towns and locations. However, we are now also in the major CBDs of Durban, Johannesburg, Tshwane, Mbombela, and Bloemfontein, as well as many townships across the country.”

Masojada was part of the team that negotiated the sale of Boxer to Pick n Pay 22 years ago. Boxer has averaged one new store every week for the last three financial years.

Pick n Pay’s $658m recapitalization

This is the second and final step of Pick n Pay Group’s two-step recapitalisation plan, which was announced at the start of 2024 and aims to strengthen the group balance sheet.

Step one was completed in August (see the press release from 5 August), and the successful ZAR 4 bn ($220m) rights offer was 106% oversubscribed. This moved the Pick n Pay Group back to a positive equity position of ZAR 2.9 bn, according to the company.

Proceeds received from the Boxer IPO will be used by Pick n Pay to settle the Group’s outstanding debt and to reinvest in the core Pick n Pay supermarket business.

Pick n Pay CEO Sean Summers said: “Boxer offers an unmatched customer offer, and this is evident in their incredible growth. Having been there when we bought Boxer, it is very exciting to see the business come full circle. The Boxer IPO will increase their profile and visibility, providing Boxer with access to a large pool of capital for growth. The IPO will clearly demonstrate the worth of the Boxer business, unlocking value for Pick n Pay shareholders over time.

“The initial capital raised from the listing will mean Pick n Pay will be debt-free, with a strong balance sheet and a significantly reduced interest bill, and in a position to accelerate its turnaround, driving long-term sustainable growth for all our shareholders.

“The future looks promising for Boxer as it is well-positioned to access both the formal and informal grocery market. Boxer intends to double its revenue over an estimated five-year horizon. It aims to maintain a steady pace in store rollouts, strong mid-single-digit like-for-like sales growth, and consistent profitability.”

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