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Steinhoff 'clearly plotted' Tekkie Town transfer path - judge

Aug 20 2019 16:57
Carin Smith, Fin24

The transfer path of Tekkie Town and its shares in late 2016 to Steinhoff subsidiary Pepkor (then known at Steinhoff Africa Retail or STAR) were clearly plotted before the first transfer took place, in the view of the Cape High Court.

This is one of the reasons why Judge Nathan Erasmus granted an urgent application by the former Tekkie Town owners in April, he said on Tuesday.

The aim of the application was to prevent Steinhoff from attempting to sell Tekkie Town until such time as a ruling in the former owners' main court action had been handed down. In the main court case - still to go to trial - the former Tekkie Town owners are aiming to get the business back from Pepkor.

The urgent interdict granted by Erasmus in April restrained Steinhoff from dealing with the shares in Pepkor Holdings and Pepkor Speciality in any way that would prevent the possible restitution of the Tekkie Town business and shareholding to its founder Braam van Huyssteen and the other previous owners of the business.

Pepkor claimed it had never had any intention of disposing of Tekkie Town.

'Duped'

Van Huyssteen and his partners claim they were "duped" in 2016 to accept restricted Steinhoff shares in exchange for a controlling interest in Tekkie Town. When accounting irregularities in Steinhoff came to light and then-CEO Markus Jooste resigned in December 2017, the former Tekkie Town owners cancelled the transaction with Steinhoff, but this was not accepted by Steinhoff. The former Tekkie Town owners then turned to the court to determine the outcome.

Former Tekkie Town CEO Bernard Mostert has said in the past that, following the collapse of Steinhoff, "it became clear" that the exchange agreement was based on the Steinhoff financials which the company had subsequently admitted contained irregularities and the Steinhoff shares they received in exchange turned out to be "worthless".

Mostert claims in one of his affidavits that Steinhoff, under the guidance of Jooste, insulated its SA assets as they were aware of potential legal matters starting to arise from Europe.

In the view of Erasmus, the former Tekkie Town owners made a proper case for both urgency and harm that they tried to prevent by having brought the application for the urgent interdict to prevent Pepkor from selling Tekkie Town.

Erasmus referred to the shares as "fools' gold".

"As it is apparent from the agreement itself that insofar as it relates to the applicants that it was the exchange of the entire shareholding together with the business operated by it for shares in the first respondent (Steinhoff) that turned out to be Fools Gold as a result of misrepresentations made by Jooste on the behalf of Steinhoff," stated Erasmus in the reasons for granting the urgent interdict.

In dealing with Pepkor's objections that it is an independent entity and that it was not part of the original transaction between Steinhoff and the former Tekkie Town owners, Erasmus said "these assertions lose sight of the nature of the relationships inter se in the Steinhoff Group. That it seems, might also not always be what it portrayed at first sight".

Erasmus noted that some of the decisions by Steinhoff were made the day before the Tekkie Town transaction took place and "on the same day the flow would go from one subsidiary to another".

'One store at a time'

After hearing the judge's reasoning, Van Huyssteen commented on Tuesday that the former Tekkie Town owners had always been focussed on restoring their interest in the business "and growing it in the way we always had – without debt and one store at a time".

"Over time it became evident to me that one of the reasons why Tekkie Town exists is to give a career platform to South Africans. It does not exist to shelter a select group of Pepkor executives from their losses in Steinhoff or to assist Steinhoff in servicing foreign debt with South African effort," Van Huyssteen said in a statement.

"We want to ensure that we and our colleagues retain our right to grow this business and leave a positive legacy. In that regard we remain open to any solution offered by Steinhoff that will result in this outcome."

In September 2018 the former owners of Tekkie Town started a new business, Mr Tekkie. This also led to a few ongoing court cases between the former owners and Pepkor.

Pepkor told Fin24 on Wednesday afternoon that its application for leave to appeal the ruling would be heard on September 13 and until then it would continue to follow the ongoing legal process. "We remain committed to the growth of our business and Tekkie Town forms part of this strategy," they said.

UPDATE: Update: Pepkor CEO Leon Lourens said on Wednesday that the company remains committed to the growth of its business and Tekkie Town forms part of this strategy. Pepkor's application for leave to appeal the ruling made on April 25 will be heard on September 13.

Pepkor said in a statement on Wednesday that it purchased Tekkie Town from Steinhoff for value in 2017. Pepkor was not party to the initial Steinhoff/Tekkie Town transaction at all.
 
According to Pepkor, the purchase of Tekkie Town by Pepkor was done with full consent and participation from the former owners, Braam van Huyssteen and Bernard Mostert, who were Tekkie Town directors at the time of the purchase.

"Steinhoff holds no legal position to sell Tekkie Town – and Pepkor has no intention of selling Tekkie Town. The PWC report confirmed that Pepkor had not been involved in any irregular or dubious transactions of any sorts," states Pepkor.
 
"Despite Van Huyssteen crying foul over the transaction, he has publicly admitted remaining in contact with, and maintains a close friendship with, disgraced former Steinhoff CEO Markus Jooste, the other party to the transaction."

steinhoff  |  tekkie town  |  pepkor  |  retail
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