Wiese not largest Shoprite investor
Veteran businessman’s latest sale of shares raises questions about future of retailer’s complex control structure
Christo Wiese, who established Shoprite 40 years ago, has reduced his holding in the grocery retailer to just more than 10%. For the first time in its history he is not the single largest holder of its ordinary shares.
Christo Wiese, who established Shoprite 40 years ago, has reduced his holding in the grocery retailer to just more than 10%. For the first time in its history he is not the single largest holder of its ordinary shares.
Wiese’s latest sale of shares raises questions about the continuation of Shoprite’s complex control structure, which involves deferred shares held only by Wiese.
The veteran businessman, chair of Shoprite since 1979, suffered a significant financial blow when the Steinhoff share price collapsed in December 2017 after reports of accounting irregularities at the international furniture retailer. Wiese became the largest shareholder in Steinhoff in 2015 when he exchanged his controlling stake in clothing retailer Pepkor for a 20% stake in Steinhoff in a deal valued at more than R50bn. In April 2018, he launched a R59bn claim against Steinhoff.
Shoprite’s just-released 2019 annual report reveals that in the 12 months to end-June 2019 Wiese sold 19-million ordinary Shoprite shares, taking his holding to 63.2-million shares, equivalent to 10.7%, and putting him in second place to the Government Employees Pension Fund with 11.85%. The 19-million Shoprite shares sold in 2019 brings the total sold since the Steinhoff implosion to 38.1-million or 37.6% less than the 101.3million Wiese held in July 2017.
Wiese continues to dominate control of Africa’s largest retailer through his holding of about 305.6-million deferred shares which have no economic value but control 32.3% of Shoprite’s voting rights. Shane Watkins, chief investment officer of All Weather Capital, described the sale of ordinary shares as significant. He said on Sunday that in terms of the group’s memorandum of incorporation (constitution), whenever Wiese sold ordinary shares Shoprite was obliged to repurchase a proportionate number of deferred shares at 0.1c each.
Watkins was a critic of Shoprite’s proposal earlier this year to pay Wiese R4bn for the repurchase and cancellation of all deferred shares. The idea was abandoned when more than 15% of Shoprite’s minority shareholders indicated they would oppose the R4bn payment.
Wiese’s scope to sell more Shoprite shares is limited by a second restriction in the memorandum of incorporation requiring him to hold at least 10% of the ordinary shares. If Wiese’s holding falls below 10% the deferred shares automatically lose their voting rights. A second fund manager, who did not want to be named, said that coming close to the 10% restriction might have been the motivation for the controversial proposal to buy all the deferred shares from Wiese.
The board has proposed more than doubling Wiese’s chair’s fees to R1.2m from R598,000. The group said this was justified by evidence provided by PwC’s nonexecutive remuneration report, produced yearly by the audit firm that advises listed companies on remuneration policies.
If the hefty increase is approved by shareholders at the coming annual general meeting, Wiese’s chair’s fees will still be significantly below the R2.2m the Woolworths board is hoping to secure for its new chair, Hubert Brody. Shoprite’s annual revenue is almost twice that of Woolworths and its operating profit also nearly twice as high.
WIESE CONTINUES TO DOMINATE CONTROL OF AFRICA’S LARGEST RETAILER THROUGH HIS HOLDING OF ABOUT 305.6-MILLION DEFERRED SHARES