Pepkor’s merger puts shareholder consultation in focus

Aeon Investment Management has criticised Pepkor for proceeding without a shareholder vote on its proposed combination of Flash and Shop2Shop. Its chief executive, Asief Mohammed, argues that shareholders should have a say even when listing rules don't require their approval.

BusinessTech reported that approval is not required because the transaction does not meet the Johannesburg Stock Exchange’s threshold for a related-party transaction. Under the reported terms, Pepkor would own 57.1% of the enlarged business. Pieter Erasmus, Pepkor’s chief executive and an existing minority investor in Shop2Shop, would hold 13.2%, subject to possible change before completion.

Aeon described Erasmus as having a financial conflict of interest. Mohammed proposed a voluntary, non-binding shareholder resolution that would leave ultimate responsibility with the directors.

“Seeking shareholder approval would have been good governance,” Mohammed said.

The distinction in Mohammed’s argument is between complying with listing requirements and choosing to consult shareholders. His proposed vote would give shareholders a way to express their views without transferring the decision from the board.

Pepkor’s response and plans

Pepkor said Erasmus recused himself from deliberations and decisions concerning the merger. The company also said it obtained independent valuations of both businesses and a voluntary independent fair-and-reasonable opinion.

For Pepkor, the proposed combination forms part of a broader financial-services expansion. The company says bringing Flash and Shop2Shop together will expand its payments, lending and merchant-commerce operations.

Pepkor also says the combination will broaden distribution for its planned digital bank. It plans to list the enlarged business, FintechCo, in the medium term.