Texton turkeys turn into stubborn mules
How appropriate was it that Texton’s shareholder meeting to vote on the buyback of shares from the Public Investment Corporation (PIC) took place just three days after Christmas? This was indeed a case of expecting turkeys to vote for Christmas. And guess what? They didn’t.
On December 28 the Texton shareholders voted not to approve the board’s decision to buy the BEE shares from the PIC. This wasn’t a close affair; 100% of Texton shareholders said “no” to the bizarre proposal.
The proposal would have obliged Texton to buy back about 50-million shares held by BEE shareholders who had been financed by the PIC back in 2014 when Texton was trading at R11.40. In terms of the deal that the PIC believed it had with Texton and the BEE shareholders, the repurchase would have to be done at R11.40.
It would have been great for the PIC to get all R580m of its money back, but how was it possible that the Texton board ever agreed to buy back the shares? And, even more bizarre, having agreed to buy back the shares it then stipulated that shareholders would have to approve the buyback. Surely even in 2014 it was evident that if the PIC ever wanted to force the company to repurchase the shares at about R11.40 it could be only because it couldn’t sell them in the market at that price.
It’s also bizarre that the PIC imposed such harsh terms on the BEE shareholders and their Texton partners.
The whole mess now looks as if it is heading for court. Texton looks like a fundamentally good business albeit in the currently difficult area of property. Of course, it doesn’t help that the group is now on its fourth CEO in as many years.
Luxury goods groups like Richemont, which owns the Cartier and Van Cleef & Arpels brands, had been in a bind when it came to sales on the internet. These groups feared that if they sold their range of stylish watches, perfumes and jewellery online, their brands would be devalued.
The danger is real. In the world of luxury brands, being seen as “cheap” is fatal. On the other hand, if they didn’t sell online, they would lose sales.
For about a decade luxury groups handled this dilemma by mostly ignoring e-commerce. It worked. They preserved their exclusivity and their customers happily went into their upmarket stores to buy something shiny and nice. But then their customers’ behaviour changed
they actually wanted to buy luxury goods online.
ITS SUCCESS IN SELLING ONLINE SEEMS SUDDEN, BUT FOR OVER A DECADE RICHEMONT HAS BEEN WORKING QUIETLY ON IT
Richemont has profited from this change. Its takeover of online retailer YOOX Net-aPorter Group (YNAP) has seen its online sales rise from €59m to €694m for the third quarter to end-December.
Its success in selling online seems sudden, but for over a decade Richemont has been working quietly on it. It wisely let the Italians, who were the half owners of YNAP, run the show for a few years before it took full control. It’s doing a similar thing in its partnership with Alibaba. While it expects a lot from its partnership, it wants to build it carefully.