Precedents, quandaries in Basson repurchase
At the recent Shoprite results presentation there was no shortage of fund managers and analysts happy to back any agreement the company might have had with former CEO Whitey Basson. That’s even though many of them couldn’t understand the thinking behind the controversial agreement obliging Shoprite to repurchase Basson’s shares.
The results were better than expected and, in a week when other retailers were announcing grim figures, it reminded everyone of just how valuable an asset Basson built up during his 37 years as CEO.
The proposed repurchase doesn’t make much sense — and it sets a troubling precedent. In the monkey-see, monkey-do world of executive pay, precedents are dangerous things.
How many retail executives are being awarded an inappropriately large remuneration package merely because they have the same title as Basson? That’s what benchmarking exercises do.
There’s a good chance the resolution, which needs 75%, will not get sufficient support from shareholders. The Public Investment Corporation will certainly be in a bit of a quandary; it is the sort of thing their corporate governance analysts hate. But it’s backed the Steinhoff plan, which includes a R215 valuation for Shoprite’s shares, so how could it not back a repurchase at R201 a share?
And what happens if shareholders give it the thumbs down? This would be very good news for Basson, who watches every day as the share price reaches record highs. At the current market price, he would lose almost 12% if the repurchase goes ahead. This would hardly be fair to the man who is responsible for making Shoprite the force it is.
If the shareholders don’t approve, does the contract fall away? This would seem to be the case, given that management explained the nondisclosure of the liability on the grounds that it didn’t really exist until shareholders approved it.
Cell C’s empowerment partner, CellSAf, may finally have its way now that it appears likely the telecoms regulator will scrutinise the transaction between the mobile network operator, Blue Label and Net 1.
CellSAf has strongly criticised the transaction and vowed to approach all regulatory bodies to look into the deal. It claimed it was not consulted on the deal and had approached the courts to block it.
Cell C was caught by surprise when the Independent Communications Authority of SA (Icasa) said it was seeking legal advice on the matter. It seems Cell C thought the deal would easily pass regulatory scrutiny and filed it as a notification to allow the regulator to update its books.
But Icasa said the deal could possibly constitute a change of control of Cell C. This was because Blue Label owned a 45% stake, making it Cell C’s single largest shareholder.
If a deal is filed as an application for change of control, it is likely to be subjected to public scrutiny, meaning that Icasa may invite interested parties to make comments on the deal and also hold public hearings before making a final decision.
Icasa has every right to scrutinise the transaction because of the considerable effect on competition in the sector.
If Cell C, Blue Label and Net 1 have nothing to hide, they must open their books for inspection.