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We don't have plans to sell off Tekkie Town, says Pepkor as court case looms

Apr 30 2019 13:13
Lameez Omarjee and Carin Smith, Fin24

Steinhoff [JSE:SNH] subsidiary Pepkor has said it has no intentions of selling off shoe retailer Tekkie Town.

This follows an interim ruling by the Cape Town High Court on Friday, which prevented Steinhoff from disposing of the shares it holds either directly or indirectly in Tekkie Town. 

Tekkie Town's founders, including former CEO Bernard Mostert, filed a court application earlier in April to interdict Steinhoff and its subsidiaries from disposing of shares in the chain of shoe stores ahead of an upcoming court case. 

Tekkie Town was bought by Steinhoff in late 2016, and was later transferred to STAR, the JSE-listed company that contained Steinhoff's African retail assets. After Steinhoff's share price plunged in December 2017 amid an accounting scandal, STAR changed its name to Pepkor

In June 2018 Tekkie Town's founders quit Steinhoff, and proceeded to found a new shoe retail chain called Mr Tekkie. 

Fin24 previously reported that the original founders want to get the shoe retailer back, and have approached the courts to do so. 

The founders have argued that an exchange agreement with Steinhoff, which resulted in Steinhoff getting a stake in Tekkie Town through the exchange of Steinhoff shares, was based on financials from Steinhoff which have since been revealed to be irregular and a misrepresentation of the true state of the global retailer's financial position.

'Inflated profit' 

In mid-March 2019, Steinhoff published an 11-page overview of a forensic report by PricewaterhouseCoopers into the company's financials. The overview stated that a "small group" of former Steinhoff executives inflated the profit and asset values of the Steinhoff group for years. The full 3 000 page-report has not been made public yet. 

As Pepkor and the Tekkie Town founders wait for a court hearing around the merits of whether the shoe retailer's founders can get Tekkie Town back, the high court has ordered that Steinhoff exercise its control over Pepkor and Tekkie Town in such a way that the shareholding in Tekkie Town is "preserved and prevented from being alienated or encumbered in whole or in part".

Tekkie Town has also been prevented from further issuing any of its own shares.

If Pepkor intends to dispose of Tekkie Town shares, it must notify, in writing, all parties involved in the intended transaction that Tekkie Town is the subject of claims in a legal process. 

Pepkor, meanwhile, said the ruling has had "no effect" on operations at Tekkie Town stores. "Pepkor has never had any intention of disposing of Tekkie Town and it still forms part of our growth strategy with more than 30 stores to open during this financial year," it said in a statement. 

"We are confident that the legal process to follow will validate the investment we have made in this business," Pepkor said of the upcoming court case.

*This article was corrected on September 1, 2019 at 10:00 to indicate that Steinhoff has been barred of disposing shares in Tekkie Town, and not Pepkor as was previously stated.

steinhoff  |  tekkie town  |  pepkor  |  court battle
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