Steinhoff Seeks $1.2 Billion From Discount Chain Pepco’s IPO

(Bloomberg) -- Steinhoff International Holdings NV is looking to raise as much as 4.6 billion zloty ($1.2 billion) by listing its European retail arm Pepco Group NV in Poland, capitalizing on increased demand for discount goods amid the coronavirus crisis.

The South African retailer and other holders plan to sell 101.3 million existing shares, the company said in a statement on Wednesday. Pepco won’t receive any proceeds from the offering.

Shares will be marketed at 38 zloty to 46 zloty apiece. At the top end of the range, the offering would be the sixth largest-ever in Warsaw. The deal, which values Pepco at as much as 26.4 billion zloty, will be priced on May 14, with the new stock set to start trading in Warsaw on or about May 26.

Pepco is one of the largest brick-and-mortar retailers to tap the European IPO market after a spate of listings by companies benefiting from the shift to virtual sales in recent months. Those included Polish postal locker firm InPost SA, e-commerce platform Allegro.eu SA and British online shopping emporium THG Plc.

Low-priced retailers have thrived over the past year, even with limited or no e-commerce. The global recession triggered by the pandemic has accelerated the generational shift toward frugality and discounters that began during the financial crisis more than a decade ago.

In Poland, Pepco’s biggest market, off-line retailers such as Dino Polska SA and Jeronimo Martins SPGS SA’s Biedronka chain proved resilient to the pandemic as consumer demand for staples boosted sales. Analysts at Santander Bank Polska SA and PKO Bank Polski SA said Pepco can withstand e-commerce competition because of its fast pace of opening stores, chances of returning to high like-for-like sales growth and low average basket value.

Steinhoff, which was plunged into an accounting scandal in 2017, will list as much as 17.5% of Pepco. The offering includes an option to sell an additional 15.4 million shares if there’s sufficient demand. Steinhoff has been looking to sell or list the business for more than a year to raise funds to repay debt.

Pepco also struck agreements with lenders for 550 million-euros ($659.9 million) of new term loans and a 190 million-euro revolving credit facility, according to a separate statement last week.

The company has more than 3,200 stores in 16 markets. Its operations include the Pepco discount clothing and homeware chain, which has a presence in fast-growing eastern European countries including Poland, Romania and Bulgaria and discount retail chain Poundland in the U.K. The company also runs Dealz outlets with food and cosmetics in Ireland, Spain and Poland and recently expanded into Italy as part of its plan to reach more western European markets.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. are global coordinators for Pepco’s IPO. Barclays Plc, BM PKO BP and Banco Santander SA are joint bookrunners; Pekao Investment Banking SA and Bank Polska Kasa Opieki SA - Biuro Maklerskie Pekao are co-bookrunners, while ING Bank NV and Trigon Dom Maklerski SA are co-lead managers.

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