Pepkor’s deal to merge its fintech arm with a rival business has upset some directors and investors because shareholders were not allowed to vote on a transaction that marks a major shift in strategy for Africa\u2019s biggest clothing retailer.<\/p>\n\n\n\n
Some directors voted against the decision by one of Africa\u2019s biggest retailers to combine its Flash arm with Shop2Shop in July to create a company valued at about R21 billion, according to a person familiar with the situation who didn\u2019t want to be named because the board vote isn\u2019t public.<\/p>\n\n\n\n
The directors objected to the lack of investor involvement while a top 30 investor, Aeon Investment Management, said shareholders should have voted on a deal where Pepkor Chief Executive Officer Pieter Erasmus also has a clear financial conflict of interest.<\/p>\n\n\n\n
Pepkor will own 57.1% of the enlarged fintech group, while Erasmus \u2014 who held a minority position in Shop2Shop \u2014 will own a 13.2% stake valued at about R2.8 billion based on the transaction\u2019s implied valuation. That could change before the deal is completed.\u00a0<\/p>\n\n\n\n
The transaction doesn\u2019t require shareholder approval under Johannesburg Stock Exchange rules because it doesn\u2019t meet the exchange\u2019s threshold for a related-party transaction. <\/p>\n\n\n\n
Erasmus recused himself from deliberations and decisions concerning the merger, according to Pepkor.<\/p>\n\n\n\n
Even so, seeking shareholders\u2019 views would have demonstrated better corporate governance, according to Asief Mohammed, chief executive officer of Aeon, which holds a 0.4% stake in Pepkor. <\/p>\n\n\n\n
Some directors voted against the transaction as they believed it should be put to shareholders, according to a person familiar with the situation that didn\u2019t want to be named because the board vote isn\u2019t public.<\/p>\n\n\n\n
\u201cIt would have gone down better had they done it,\u201d Mohammed said. \u201cSeeking shareholder approval would have been good governance.\u201d<\/p>\n\n\n\n
Mohammed said Pepkor could have offered a voluntary, non-binding shareholder resolution, letting investors express their views while leaving ultimate responsibility for the transaction with directors.<\/p>\n\n\n\n
\u201cYou could do that, and then you can maybe engage if necessary,\u201d he said.<\/p>\n\n\n\n
Pepkor says it obtained independent valuations of both businesses and a voluntary independent fair-and-reasonable opinion.<\/p>\n\n\n\n
The retailer declined to disclose how many individual directors had voted in favor of the deal, citing the confidentiality of board proceedings. <\/p>\n\n\n\n
Governance concerns over the deal come as Pepkor pushes deeper into financial services to find new sources of growth beyond its core discount-retail operations.\u00a0<\/p>\n\n\n\n
Cape Town-based Flash serves 170,000 informal traders, enabling them to sell virtual products such as airtime, mobile data and prepaid electricity. <\/p>\n\n\n\n
Shop2Shop is another payment platform for informal traders with more than 210,000 users.\u00a0<\/p>\n\n\n\n
Pepkor has said combining Flash and Shop2Shop will expand its payments, lending and merchant-commerce businesses and broaden distribution for its planned digital bank. <\/p>\n\n\n\n
It plans to list the new firm, FintechCo, in the medium term.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
Pepkor has faced backlash from shareholders over plans to merge its fintech division with a rival business.<\/p>\n","protected":false},"author":59,"featured_media":834608,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"posted","_sma_x_autopost_error":"","_sma_x_post_id":"2109566251194335325","_sma_facebook_post_id":"191437357620492_2234522394034826","_sma_instagram_post_id":"18008677967780756","_sma_x_attempts":2,"footnotes":""},"categories":[9872],"tags":[26773,4076,26772],"class_list":["post-879323","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-aeon","tag-pepkor","tag-pieter-erasmus"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/879323","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=879323"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/879323\/revisions"}],"predecessor-version":[{"id":879342,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/879323\/revisions\/879342"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/834608"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=879323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=879323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=879323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}