Dis-Chem Plans Johannesburg Share Sale to Double Pharmacies

  • Owners to partially sell shareholdings; will remain investors
  • Shares in listed rival Clicks decline as much as 3 percent

Dis-Chem Pharmacies (Pty) Ltd. plans to sell shares on the Johannesburg Stock Exchange as South Africa’s second-biggest pharmacy chain by stores seeks to repay debt and double the number of outlets over the next eight years.

The offering will be available to selected institutional investors or individuals prepared to commit to at least 1 million rand ($70,000) worth of stock, the Johannesburg-based company said in a statement on Monday. The family trust of co-founder and Chief Executive Officer Ivan Saltzman, which owns 67 percent of the retailer, and other investors will sell part of their shareholdings.

The plans to list come as South African retailers face challenges including weak domestic consumer confidence, rising interest rates and unemployment of 27 percent in an economy that’s growing at the slowest pace since a 2009 recession. Investors are also closely watching the development of a power struggle between President Jacob Zuma and Finance Minister Pravin Gordhan, who was summoned to appear in court on fraud charges on Tuesday.

It’s a “very volatile time” to come to the market, Alec Abraham, senior equity analyst at Sasfin Securities, said by phone from Johannesburg. “The risk of the U.S. Federal Reserve raising rates and more political turbulence locally may mean we see more funds exiting the stock market.”

Clicks Falls

Shares in Clicks Group Ltd., the only listed South African pharmacy chain, fell as much as 3.1 percent and traded 1.3 percent lower at 119.13 rand as of 1:06 p.m. in Johannesburg, pairing its gain this year to 34 percent.

“The only opportunity local stock investors have had has been through Clicks, which has performed well,” Abraham said. “Dis-Chem is a far more compelling health and beauty retailer.”

Dis-Chem, which was founded in 1978, has tripled its store base to 103 in South Africa and Namibia since 2008. It had revenue of 15.5 billion rand and earnings before interest, taxes, depreciation and amortization of 1.1 billion rand in the year ended Feb. 28, the company said.

There have been four initial public offerings in Johannesburg in 2016, according to data compiled by Bloomberg. The biggest to date was EPE Capital Partners Ltd., which raised 1.8 billion rand in July.

Goldman Sachs International, Investec Bank Ltd. and Standard Bank Group Ltd.’s South African unit have been appointed as joint coordinators and bookrunners.

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