The Cape Town High Court has issued an order preventing disgraced global retailer Steinhoff from selling its shares in Tekkie Town, or from using the shares as any form of collateral whatsoever.
Tekkie Town is part of Pepkor, which in turn, is majority owned by Steinhoff.
The former owners and management of Tekkie Town launched the urgent application in the Western Cape High Court last week out of fear that Steinhoff may attempt to sell its shares in Tekkie Town to defray certain of its own expenses.
“This judgment provides a measure of safety for us in our ongoing effort to get our company back,” says former Tekkie Town CEO Bernard Mostert. “Recent revelations and actions by Steinhoff – including an increased velocity in selling assets – suggest to us that Steinhoff’s shareholding in Pepkor itself or the integrity of Pepkor’s controversial shareholding in Tekkie Town may be at risk, be it through attempts to sell the business or efforts to raise debt against the business and its assets,” he says.
In 2017 Tekkie Town was sold to Steinhoff – before Steinhoff unbundled its South African retail assets – in exchange for shares. When Steinhoff collapsed in December that year, following revelations of accounting irregularities, founder Braam Van Huyssteen and others were left holding worthless paper.
Financial gerrymandering
Steinhoff maintains that the transaction was above board. However, a cursory glance at the report released by auditors PwC, following a lengthy forensic investigation, suggests financial gerrymandering of epic proportions. According to the report Steinhoff executives led by Markus Jooste were responsible for adjusting Steinhoff’s actual financial position by about R106 billion.
Steinhoff is yet to publish its long-delayed 2017 audited financials or other restatements that should fully reflect the extent of what the company itself has labelled “non-compliance with laws and regulations, and misappropriations.”
The Tekkie Town founders did not wait for the report, however. They were among the first to institute legal proceedings against Steinhoff NV, having launched a restitution action in the Western Cape High Court in May 2018 seeking the return of their shareholding and, with it, the Tekkie Town business.
“At the same time we approached Steinhoff and Pepkor asking for undertakings that the shares would not be impeded in any way,” says Mostert. “We did not want the shares to be ceded to some other entity in which case our company would move further and further away from us. They batted us away, forcing us to take this step.”
The court has not only restrained Steinhoff from dealing in the shares in any way that might affect the former executives’ claim over the company, but has ruled that Tekkie Town may not issue new shares (which would be dilutive to the former owners). The order holds until such time as the court case referred to above is finalised.
Pepkor unfazed
On the other side, Pepkor management was seemingly unmoved by the judgment.
“Today’s interim ruling has no impact on the day-to-day operations of Pepkor,” the company said in a statement. “Similarly, it has absolutely no effect on the operations and stores of the Tekkie Town business.”
Pepkor has no intention of disposing of Tekkie Town. To the contrary, the company says, the plan is to open another 30 stores during this financial year.
“We shall continue to grow the business and make decisions that are in the best interest of Pepkor,” the statement says. “We are confident that the legal process to follow will validate the investment we have made in this business.”
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