Steinhoff to proceed with Pepco IPO ahead of Warsaw listing

STEINHOFF International leapt more than 3 percent on the JSE on Monday morning after the retailer said it planned to proceed with the initial public offering (IPO) of Pepco Group.

The group said the move, which would result in its listing on the Warsaw Stock Exchange, came after it received necessary consents from its financial creditors to sell at least 15 percent of shares in Pepco Group for nearly R13 billion.

Pepco said it believed that the offering and admission was a natural step at this point in its growth and maturity, giving it access to a wider range of capital-raising options which may be of use in the future.

“It is intended to diversify the group’s shareholder base and further the group’s separation from the Steinhoff group, improve the ability of the group to recruit, retain and incentivise its key management and colleagues, and create a liquid market in the shares for existing and future shareholders,” Pepco said.

Pepco is a discount variety retailer which operates in more than 16 countries in Europe and has more than 3 200 stores.

Sources say Pepco, which owns Poundland in the UK as well as the Pepco and Dealz brands in Europe, was valued at around $6bn (R85.44bn).

Steinhoff has been battling for survival since it admitted to accounting irregularities in 2017 which led to a more than 95 percent decline in its share price.

It said the planned offering would consist of the sale of its existing shares by current shareholders and the offering targets institutional and retail investors, including a public offering in Poland and an offering to certain institutional investors in and outside of the US.

Pepco chief executive Andy Bond said their intention to float on the Warsaw Stock Exchange marked an important milestone for the group.

“We are strongly positioned to deliver significant long-term growth, given our market leading customer proposition in the most attractive sector of retail, the scale of opportunity ahead of us as we expand across the entirety of Europe and the investment in strengthening the infrastructure of the business over recent years,” Bond said.

Pepco Group’s store roll-out programme has increased its Pepco store portfolio by approximately 300 net new stores as announced in the three years to end September 2020 and it targets to open 70 new stores a year under the Dealz brand in Poland and Spain starting from the financial year 2021.

Bond said each of their retail businesses had a clear strategy for continued growth.

“Our Pepco brand has consistently opened more than 300 stores and entered one new territory a year. Following the brand’s successful launch in Italy and Serbia and its scheduled opening in Spain later this spring, we now have the opportunity to target the whole of Europe for Pepco, leading to even greater growth and scale,” he said.

Pepco Group’s ambition is to deliver more than €1bn (R17.31bn) in earnings before interest, tax, depreciation and amortisation (Ebitda) within five to seven years.

In the year to end September 2020, Pepco Group reported a 30.82 percent decline in Ebitda to €229m, due to the impacts of Covid-19 after some of its stores were closed to limit the spread of the pandemic.