Shoprite can’t justify Basson’s huge payout
RMB has tried to sanitise Shoprite’s R1.7bn cash payout to former CEO Whitey Basson with a “fair” opinion, which may be just enough to persuade lemminglike shareholders to vote it through. But they must know it makes absolutely no sense for Shoprite shareholders to support the special resolution needed to make the payment.
Without doubt, Basson is the best retailer this country has seen in decades; also without doubt, he should get almost all the credit for building Shoprite into the powerhouse it is today.
If he was halfway through his career and Christo Wiese was trying to persuade him to remain with Shoprite, the R1.7bn payment might make sense. But the fact is Basson has retired, he is never going back to Shoprite, so the R1.7bn is nothing more than an enormously generous thank you.
How can any institutional fund manager with duties to possibly millions of employees and pensioners justify this sort of generosity?
Even if Shoprite did have huge amounts of cash lying around and even if the economies in which it operated were on strong growth paths, it would be difficult to justify this handout. The cash-flow implications are chilling.
The company will have to borrow R1.7bn and it will be paying interest of R137.4m a year on that loan. This is the goodbye gift that keeps costing.
It is not as though the fund managers can be accused of reneging on an agreement. No one outside the very top layer of Shoprite management knew about this little arrangement until early May.
This raises the issue how the board or remuneration committee was able to give an undertaking that could not be implemented without shareholder approval and then never tell the shareholders.
The undertaking to use R84m for an education trust is, in the context of a group not known for its philanthropy, an additional bizarre twist.
Resilient Reit and the members of its stable such as Fortress Income Fund, NepiRockcastle and Greenbay are set to be the stars of listed property on the JSE.
Resilient outdid its peers last week, when it declared doubledigit dividend growth. Fortress followed suit on Tuesday.
Resilient Reit grew its dividend 16.1% and Fortress grew its B-dividend 25.09% in the financial year to June. Greenbay, the newest member of the stable, is expected to declare double-digit dividends when its results are released on Friday.
Resilient and Fortress have made good investments over the past five to 10 years, especially offshore. Resilient, the first to list, has made Europe the cornerstone of its strategy. As much as 60% of its income growth for 2018 could come from its investment in NepiRockcastle.
This fund is the largest property stock on the JSE.
It was formed from New Europe Property Investments (Nepi), focused on Romania, and Rockcastle Global Real Estate, focused on Poland. The company is now worth R97.6bn and Resilient’s stake in NepiRockcastle is worth about R13bn — about the size of a mediumsized fund on the JSE.
There is still time for retail investors to get into NepiRockcastle, which is priced at about R180. It should get some momentum when the stock joins European property indices and attracts index trackers.