Steinhoff, Star in limbo
Want to go back to doing what they do best – selling inexpensive merchandise.
Legal proceedings with Tekkie Town are preventing Star from returning to retail.
Steinhoff Africa Retail (Star) wants to go back to doing what they do best – selling vast quantities of inexpensive merchandise to the mass market. Instead, the fallout from the implosion of their majority shareholder, Steinhoff, seems a never-ending distraction.
Star management was forced to issue a statement via Sens last night confirming that the founders and former shareholders of Tekkie Town have begun legal proceedings to claim money owing from several earn-out agreements that the founders allege were in place with Steinhoff.
Steinhoff acquired Tekkie Town in a cash and share deal in 2016. However, when it unbundled its African retail businesses into Star in September 2017, Tekkie Town went with it. As a result, Tekkie Town’s shareholders and founders believe that Star is now required to honour any former agreements between it and Steinhoff.
The problem is that Star executives do not believe they are party to any earn-out agreements.
“We have been shown some e-mail correspondence on this matter between Steinhoff and Tekkie Town,” says Star chairperson Jayendra Naidoo. “Star’s legal advisors believe [Mr van Huyssteen’s] claims, if any, are only a matter for Steinhoff and Star is not legally subject to any claims.”
The Steinhoff acquisition of Tekkie Town occurred prior to the establishment of Star and its acquisition of assets.
“The so-called ‘earn-out’ is not a matter on which Star has entered into any contract whatsoever.”
The claims from the Tekkie Town founders are the most recent in a series of “hurdles” that Star management has been dealing with over the last six months.
“We feel that since we raised the funding to cover our guarantees to Steinhoff, the challenges are growing smaller.”
Steinhoff, which owns 71% of Star, is in a precarious financial position. The last thing Star needs or wants is a fire-sale of its shares.
“The stake in Star is owned by Steinhoff and ultimately when they choose to sell their shares we will take provisions to assist in creating a market – not that Steinhoff needs the help. Right now we are not doing anything to push the base.”
Steinhoff raised R3.75 billion by selling 7% in Star in April. It is in a 90-day lock-up period whereby it cannot sell any further Star shares. However, the possibility that further sell-offs are possible is something the board is very aware of, says Naidoo.