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No foul play in dividend to transfer Lodestone shares - Jooste son-in-law

May 22 2018 22:00
Carin Smith
The declaration of a dividend in specie (a distribution to shareholders in a form other than cash) – which included the transfer of Lodestone shares from Mayfair Speculators to Mayfair Holdings – was above board, according to Markus Jooste's son-in-law Stefan Potgieter.

Potgieter is a director in Second Chapter Investments (SCI), Lodestone and Jooste’s Mayfair Holdings and Mayfair Speculators, four of the respondents in an application brought by some minority shareholders in Lodestone. Jooste is the former CEO of Steinhoff.

SCI is the majority shareholder in Lodestone (66.7%). SCI has two shareholders: Mayfair (78.37%) and SCI P1 (21.63%).

One of the issues being litigated is the dividend declared in specie, which included the transfer of Lodestone Brands shares from Mayfair Speculators to Mayfair Holdings.

Potgieter claims there was no wrongdoing, because Mayfair Holdings subsequently guaranteed the debts owed to the Mayfair lenders by Mayfair Speculators. The transfer did not have the effect of prejudicing those institutions, Potgieter argues in his opposing affidavit.

Greg Senior, one of the applicants, claims Mayfair is "in all likelihood scrambling to sell its shareholding in Lodestone through every means possible". Senior is CEO of Mister Sweet, a division of Lodestone Brands.

The applicants want to prevent Jooste's Mayfair and others from selling their shareholding in the company (Lodestone) in a “competitive sale process”.

Mayfair Speculators is a wholly owned subsidiary of Mayfair Holdings, and its primary assets are, among others, the share portfolio held by SBG Securities in Steinhoff.

The applicants regard the conduct of the respondents as "oppressive and unfairly prejudicial to the rights of the applicants" and want the court to interdict any further steps by them to dispose of their shareholding in Lodestone.

•    READ:Lodestone share sale shouldn't be 'one horse race', says Markus Jooste's son-in-law

Senior says in his affidavit, in support of the application, he is "gravely concerned" that in August and October last year, the board of directors of Mayfair Speculators declared the dividend to Mayfair Holdings of Mayfair Speculators' shareholding in Lodestone.

"By declaring the dividend in specie to Mayfair Holdings, Mayfair Speculators effectively disposed of assets to the value of R1.5bn when Jooste was director," states Senior.

In his view, it is "overwhelmingly probable" that Jooste and Potgieter were aware of the financial irregularities in Steinhoff and that these would be revealed in the near future – causing Steinhoff's shares to plummet, loans from the banks to become due, and Mayfair Speculators not to have sufficient liquidity to discharge these debts.

Potgieter, on the other hand, states in his version that he had no knowledge of any irregularities internal to Steinhoff in August 2017.

•    READ:Parties to meet as Markus Jooste's Mayfair aims to 'offload' Lodestone stake

"The reason for the dividend in specie was to continue with the ongoing restructuring of the group and thereby incentivise the executive team within a dedicated structure and to retain skill and expertise to ensure succession planning going forward," Potgieter says in his opposing affidavit.

"This decision to declare a dividend was the culmination of three years of negotiations to restructure the group and to incentivise the management team."

While Potgieter acknowledges it is correct that Mayfair Holdings intends to sell its direct and indirect shareholding in Lodestone to satisfy the debts owed by Mayfair Speculators to the Mayfair lenders, as well as its other creditors, that is not relevant to the matter of SCI's right to sell its shares in Lodestone at any time for any reason, and according to a competitive sale process in terms of the Lodestone's Memorandum of Incorporation.

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