Steinhoff has sold a tranche of Pepkor shares to the value of R7.3 billion, to settle legal claims against the group and buy indemnity from prosecution for members of management who might have been involved in South Africa’s biggest accounting fraud yet.
The sale of the latest tranche of Pepkor shares effectively reduces Steinhoff’s interest in Pepkor to 50.1%, from the 70% it held when Steinhoff listed Pepkor in a move that was generally seen as an attempt to safeguard Pepkor from Steinhoff creditors.
The transfer of Pepkor shares to claimants, or the placing of shares with investors on behalf of those who would not take shares from Steinhoff again, follows years of wrangling and legal action with claimants positioning themselves to either get preferential treatment, a few crumbs – or nothing.
Payday imminent … for some
Steinhoff announced on Tuesday that it has “placed” 370 million Pepkor shares effective September 17 to settle the strongest and most vocal of the claimants.
“Steinhoff is pleased to announce the successful completion of the placement of 370 million placing shares, raising total gross proceeds of R7.3 billion (€0.4 billion),” says the announcement.
“The placing shares were placed at a price of R19.75 per share, a 9% discount to the pre-launch closing share price of ordinary shares of no par value in Pepkor at market close on September 13, 2021.”
The 370 million shares amount to 9.9% of the total issued shares, with Steinhoff saying that the placement reduces its interest in Pepkor from 68.2% to 50.1%.
The placement comes with a sting in the tail.
The new owners will not be able to sell the shares for a period of six months from the date of receipt, to prevent the new owners from dumping the shares on the market immediately and driving Pepkor’s share price down.
“These shares will be subject to a 180-day lock-up commencing from the date of transfer, which is expected to coincide with the closing of the global settlement process,” advised an earlier communication from Steinhoff (on Tuesday, September 13) with regards to the share placement.
Steinhoff also committed not to sell any more Pepkor shares for the next 180 days.
In essence, Steinhoff has used about a third of its original interest in Pepkor to settle legal claims, with a lot of claims still outstanding.
Listen to Ryk van Niekerk’s interview with former Steinhoff chair Christo Wiese (or read the English-translation transcript here):
Pain for Pepkor
In reaction, Pepkor’s share price fell by more than 10% at the opening of trading, later recovering a bit of the losses to close the day nearly 8% lower at just above R20.
However, the realisation of a potential overhang of 370 million shares might be the least of Pepkor’s problems.
The elephant in the Pepkor boardroom is the brewing legal dispute with the previous owners of Tekkie Town.
The Tekkie Town vendors are continuing their fight to get Tekkie Town back from either Steinhoff, alleging that the purchase was paid for with shares that Steinhoff knew were worthless at the time.
Pepkor has won some of the legal skirmishes, and the Tekkie Town vendors have won others.
These legal fights were all quite small in comparison to the latest assault in which the Tekkie Town vendors won the legal right to apply for the liquidation of Steinhoff in SA, in an effort to pursue their rights.
There is a risk that Pepkor could lose Tekkie Town, an important asset and contributor to profit.
Tekkie Town has around 400 stores. Pepkor disclosed in its latest results that Tekkie Town is as popular as ever and continues to grow its market share.
Like-for-like sales increased by 13.5% in the speciality division during the six months to March 2021, compared with 6.9% for Pep Stores.
Listen to former Tekkie Town CEO Bernard Mostert’s being interviewed on SAfm Market Update with Moneyweb (or read the transcript here):