JOHANNESBURG – Steinhoff stuck to its guns over its handling of the Pepkor transaction at a fairly uneventful AGM on Tuesday, as chairman, Dr Len Konar said he would “disagree agreeably” with the views of corporate governance activist, Theo Botha.
Botha was less interested in whether the directors followed all the JSE’s rules and regulations, in the conclusion of the Pepkor transaction, and more concerned as to whether the actions of the directors were fair to minority shareholders. “Minority shareholders sold shares and they weren’t in a position of information, as let’s say, the board of directors were. So I felt that it was actually unfair,” he told Konar.
On November 25, Steinhoff announced it would pay R62.8 billion for a 92.34% stake in Pepkor. Just more than 52% of this came from business veteran Christo Wiese’s family trusts, 34.9% came from private equity firm Brait and 2.81% came from Pepkor management.
Brait shares tumbled on the news, while much has been written over who benefitted most from the deal and who lost out.
It later emerged that Steinhoff directors, including CEO Markus Jooste (pictured) and founder Bruno Steinhoff, as well as Wiese had made share purchases worth millions of rands in early September, on and shortly after the company issued results for the year to June 30.
Speaking at the company’s Johannesburg headquarters, Jooste said that the acquisition of Pepkor was a “game changer” for Steinhoff and he was satisfied with the way in which it had been concluded, with full support being given by institutional shareholders.
“We believe and submit that we have acted appropriately, professionally, properly and without fear or favour,” Konar said at the meeting, referring to confirmation from the JSE’s general manager Andre Visser that there was “nothing to investigate and the conduct of the directors is beyond reproach”. He said shareholders were privy to “various bits of information” on different platforms.
“Aspersions will be cast, but in our heart of hearts, we know that we’ve done the right, proper and professional thing,” Konar maintained.
Wiese weighs in
Konar said Steinhoff “daily assessed” the risks of price sensitive information reaching the market, but was confident there would be no leak and therefore did not issue a cautionary. Directors’ share transactions were in any event published on Sens, Konar noted, at a time when the “hard bargaining” around the Pepkor transaction was not yet underway.
Brait, however, issued a cautionary on September 19, the week after Steinhoff directors bought shares, to the effect that it had entered negotiations which could have a material affect on the share price if successfully concluded.
Botha questioned how such a large deal could be concluded so quickly. “This is a tremendously important acquisition, that an investment committee would have looked at over a period of time,” he told Moneyweb. He said ultimately the company, in which these individuals are invested, would lose out if they as its custodians behaved in this way.
Speaking to Moneyweb after the AGM, Wiese acknowledged that he knew of discussions, but that until Monday (November 24), there was no certainty that the deal would happen. When asked when discussions commenced, Wiese replied, “six or seven years ago”.
“So they were imminent for six years and I’ve been buying shares [in Steinhoff] for six years,” he said noting he already had 45 million shares when he bought the additional one million in September and that he had bought 3.5 million in March and April. “It has nothing to do with the deal,” Wiese said, explaining that when the equity raising rights issue was made mid-year, all the directors had to step back from following their rights and could not buy shares before results were announced on September 9, due to the company being in a closed period.
“At the conclusion of this deal, the three people accused of insider trading [Wiese, Jooste and Steinhoff] together hold shares worth R60 billion. Jointly they bought R120 million [worth of] additional shares [in the weeks before the deal],” Wiese pointed out.
Jooste said he looked forward to a successful 2015 for Steinhoff, noting that the quarter July to September had been “the best quarter in Steinhoff’s life” in most of the territories where it operates. He said Europe was an “exciting expansion territory” in years to come and that operating at the lower end of the market was beneficial in tough times because customers tended to shop down.
Konar thanked Botha for helping shareholders make informed decisions through his business Proxy View. “We need shareholder activism, we need challenge because that brings out the best in us,” Konar said.