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Small Related Party Transaction
PEPKOR HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2017/221869/06)
Share code: PPH
Debt code: PPHI
ISIN: ZAE000259479
(“Pepkor” or “the Company”)
SMALL RELATED PARTY TRANSACTION
1. INTRODUCTION
1.1. Shareholders and noteholders are advised that on 18 December 2020, after an extended period of
negotiations and a detailed due diligence, the Company and two of its wholly-owned subsidiaries,
Ultimo Properties Proprietary Limited (“Ultimo”) and JD Consumer Electronics and Appliances
Proprietary Limited (“CEA”) entered into inter alia a framework agreement (“Framework Agreement”)
with Steinhoff Africa Holdings Proprietary Limited (“Steinhoff Africa”) and the Steinhoff Subsidiaries,
as defined below. In terms of the Framework Agreement Ultimo and CEA have agreed to –
1.1.1. acquire 10 properties and an undivided half share in another property, together with the rental
enterprises conducted thereon (“Rental Enterprises”), from the Steinhoff Subsidiaries. Entities
within the Pepkor group of companies (“Pepkor Group”) currently lease these 11 properties; and
1.1.2. take transfer, by way of a cession and delegation, of a long-term notarial lease between Tanzanite
(as lessee) and the Elias Motsoaledi Local Municipality (as lessor) (“Groblersdal Lease”) and of
the sub-lease concluded in respect of this property from Tanzanite, upon which CEA will become
the new lessee. An entity within the Pepkor Group is the sub-lessee in terms of the sub-lease,
(together, the “Transaction”).
1.2. Details of the properties are set out in the table in paragraph 8 below.
1.1. The Steinhoff Subsidiaries comprise the following indirect wholly owned subsidiaries of Steinhoff
International Holdings N.V. (“Steinhoff N.V.”): Steinhoff Properties Proprietary Limited (“Steinprop”),
JD Group Property Holdings Proprietary Limited (“JD Group Property Holdings”), Tanzanite
Treasure Trading 7 Proprietary Limited (“Tanzanite”), Showboat Trade and Invest 17 Proprietary
Limited (“Showboat”) and Copperzone 185 Proprietary Limited (“Copperzone”)
2. RATIONALE FOR THE TRANSACTION
2.1. The properties are predominantly used by Pepkor’s operating entities as distribution centres with one
property being used as a corporate head office and one property being used as a call centre.
2.2. The board of directors of Pepkor believes that the Transaction will result in the following benefits for
the Pepkor Group:
2.2.1. operational cost savings, as the rental expenses relating to the properties rented by the Pepkor
Group from the Steinhoff Subsidiaries amounted to R111 million during Pepkor’s 2020 financial
year, which is expected to be accretive on an earnings per share basis (without taking IFRS16 into
account) and results in a cash saving for the Pepkor group;
2.2.2. secures ownership of high roof distribution centre buildings for Ackermans, Pepkor Speciality and
JD Group that are strategically important to their businesses; and
2.2.3. secures ownership of Tenacity’s call centre and JD Group’s corporate head office, the locations of
which are ideally suited to cater for their operational needs.
3. PURCHASE CONSIDERATION
3.1. The aggregate purchase consideration payable in terms of the Transaction is R1,050,000,000 (one
billion fifty million rand) (“Aggregate Consideration”), which will be settled by Pepkor issuing, in
aggregate, 70 000 000 (seventy million) new Pepkor shares (“Pepkor Consideration Shares”) to the
respective Steinhoff Subsidiaries. It is considered appropriate to issue new Pepkor shares in order to
preserve cash resources. The Pepkor Consideration Shares equates to 1.91% of the issued share
capital of Pepkor prior to issuing the Pepkor Consideration Shares.
3.2. The Pepkor Consideration Shares will be issued at an issue price of R15 per share which represents
a premium of 16.0% to the volume weighted average trading price of Pepkor’s shares traded on the
JSE over the 30 trading days up to and including 19 November 2020, being the date prior to the board
of directors of Pepkor approving the key terms of the Transaction.
4. CONDITIONS PRECEDENT
4.1. In terms of the Framework Agreement, the Transaction is subject to the fulfilment of a number of
conditions precedent (“Conditions Precedent”) which include that on or before 15 March 2021 (or
such later date as the parties to the Framework Agreement may agree in writing):
4.1.1. the approvals required by the Competition Act No. 89 of 1998 for the implementation of the
Transaction have been granted, either unconditionally or subject to such conditions as have been
approved in writing by the Company and, to the extent that any conditions are imposed on them,
also the Steinhoff Subsidiaries;
4.1.2. the shareholders of Pepkor have approved, by way of a special resolution in terms of section 60 of
the Companies Act the issue of the Pepkor Consideration Shares to the Steinhoff Subsidiaries in
accordance with section 41(1) of the Companies Act;
4.1.3. the Steinhoff Subsidiaries have obtained the consent of Steinhoff N.V.’s creditors under the written
“Contingent Payment Undertakings” in place by Steinhoff N.V. in favour of its creditors, to the extent
required; and
4.1.4. the JSE has approved the admission to listing on the Main Board of the JSE of the Pepkor
Consideration Shares.
5. RESOLUTIVE CONDITION
The Transaction is subject to a resolutive condition that the Framework Agreement and all of the
substantive agreements between CEA or Ultimo, as applicable, Pepkor and the relevant Steinhoff
Subsidiary, relating to each of the relevant Rental Enterprises and underlying properties (described in
paragraph 8 below) (“Substantive Agreements”) will terminate and cease to be of further force and effect
if the registration of transfer of the Cliffdale Property (described in paragraph 8 below) into the name of
Ultimo and the issuing of the relevant portion of the Pepkor Consideration Shares to Steinprop for the
Cliffdale Property does not occur by 30 April 2021 (or such later date as the parties to the Framework
Agreement may agree to in writing).
6. EFFECTIVE DATE OF THE TRANSACTION
The effective date of the transaction is the dates of the transfer of each of the Rental Enterprises shall be
the date on which (i) transfer of the relevant property or, with respect to the Groblersdal Property, cession
and assignment of the Groblersdal Lease Agreement to CEA or Ultimo, as applicable, is registered in
accordance with the provisions of the Deeds Registries Act No. 47 of 1937, and (ii) Pepkor allots and
issues the corresponding number of Pepkor Consideration Shares to the relevant Steinhoff Subsidiary in
accordance with the relevant Substantive Agreement (as read with the Framework Agreement). The
effective date of the Properties other than the Cliffdale Property will be after the date of transfer of the
Cliffdale Property.
7. WARRANTIES AND OTHER SIGNIFICANT TERMS TO THE TRANSACTION
7.1. The Framework Agreement and the Substantive Agreements contains warranties by the parties
thereto in favour of each other, which are usual for a transaction of this nature.
7.2. The Steinhoff Subsidiaries have each undertaken not to dispose of or encumber the Pepkor
Consideration Shares received by it in terms of the applicable Substantive Agreement for a period of
at least 6 months from the date of the relevant Pepkor Consideration Shares were issued to it.
7.3. In terms of the Framework Agreement, if CEA or Ultimo dispose of any of the Rental Enterprises to a
third party within a period of 12 months from the relevant transfer date of such Rental Enterprise, at a
profit, they will be obliged to pay an amount equal to such profit up to a maximum of R200 million in
aggregate to the applicable Steinhoff Subsidiary. The aforesaid clawback shall not apply if the Rental
Enterprise is sold to another company within the Pepkor Group or if the disposal occurs pursuant to a
transaction which does not have as its primary objective, the disposal of the relevant Rental Enterprise.
Pepkor deems the acquisition of the Rental Enterprises to be strategic in nature and does not intend
to dispose of the Rental Enterprises in the next 12 months.
7.4. Steinhoff Africa has guaranteed all payment obligations of each of Steinhoff Subsidiaries in terms of
the Transaction, which guarantee is effective for a period of 6 months from the date of implementation
of each Substantive Agreement.
7.5. Steinhoff Africa has also indemnified the Company, CEA and Ultimo against any loss, expense, liability
or cost which they may suffer if Showboat, Tanzanite and/or Copperzone is liquidated at any time
within 6 months from the date of implementation of any Substantive Agreement to which Showboat,
Tanzanite or Copperzone, as the case may be, is a party.
7.6. Following the issue by Pepkor of the Pepkor Consideration Shares, CEA and Ultimo will each become
indebted to Pepkor in an amount equal to their respective portions of the Aggregate Consideration.
8. THE PROPERTIES
8.1. Details of each of the properties in respect of which the Rental Enterprises are conducted are as
follows:
Property Erf and Size Current Owner Province Property Type Tenant
Name (applicable
Steinhoff
subsidiary)
Cliffdale Erf 241 Cliffdale, in extent Steinprop KwaZulu Distribution centre Ackermans
Property 10,3167 hectares Natal (warehouse) Pepkor
Erf 242 Cliffdale, in extent Speciality
4,2527 hectares
Erf 243 Cliffdale, in extent
3,1831 hectares
Erf 244 Cliffdale, in extent
11,2510 hectares
East Gate Erf 126 Eastgate Extension Steinprop Gauteng Office building (B- JD Group
property 3, in extent 2,4765 hectares grade offices)
Kuils River Erf 9379 Kuils River, in Steinprop Western Office building (B- Tenacity
Property extent 1,0527 hectares Cape grade offices)
Jet Park Erf 684 Jet Park Extension JD Group Property Gauteng Distribution centre JD Group
Property 66, in extent 3,5739 Holdings (warehouse)
hectares
PE Property Portion 193 of Farm Kuyga JD Group Property Eastern Distribution centre JD Group
No. 8, Nelson Mandela Bay Holdings Cape (warehouse)
Metropolitan, in extent
2,5491 hectares
Polokwane Remaining extent of Erf JD Group Property Limpopo Distribution centre JD Group
Property 5669 Pietersburg Extension Holdings (warehouse)
12, in extent 3,0716
hectares
Tzaneen Portion 1 of Erf 1972, JD Group Property Limpopo Distribution centre JD Group
Property Tzaneen Extension 18, in Holdings (warehouse)
extent 2,0815 hectares
Vryburg Erf 2963 Vryburg, Naledi JD Group Property North Distribution centre JD Group
Property Municipality, in extent Holdings West (warehouse)
1,5255 hectares
Groblersdal Erf 832 Groblersdal, Tanzanite (current Limpopo Distribution centre JD Group
Property Extension 15, in extent lessee) (warehouse)
(note 1) 4,9514 hectares
Kokstad Erf 8947 Kokstad, in extent Showboat KwaZulu Distribution centre JD Group
Property 3269 square metres Natal (warehouse)
Erf 8948 Kokstad, in extent
3281 square metres
Erf 8949 Kokstad, in extent
1677 square metres
Erf 8950 Kokstad, in extent
1663 square metres
Richards Erf 8778, Richards Bay Showboat KwaZulu Distribution centre JD Group
Bay Property (Extension No. 28), in extent Natal (warehouse)
1,7437 hectares
Nelspruit Portion 3 of Erf 5, Karino Copperzone Mpumalanga Distribution centre JD Group
Property Township, in extent 4,0600 (warehouse)
(note 2) hectares
Notes:
1. The Groblersdal Property itself is not the subject of the relevant acquisition and will not be acquired by Pepkor. The
Groblersdal Lease in respect of portion A of the Groblersdal Property, in extent 1,990 hectares, is the subject of the
acquisition and will be transferred, by way of a cession and assignment from Tanzanite (as lessee) to CEA, following which
CEA will become the new Lessee, as contemplated by paragraph 1.1.2 above.
2. Copperzone is the owner of an undivided share in the Nelspruit Property. Accordingly, CEA will not acquire ownership of
the whole property but only an undivided half share in the Nelspruit Property.
9. FINANCIAL INFORMATION
9.1. The fair value of the net assets comprising the Rental Enterprises at the date of the announcement
equates to R1,050,000,000, being the purchase consideration.
9.2. The profits attributable to the Rental Enterprises for the 12 months ended 30 September 2020 were
approximately R79.6 million, based on Steinhoff’s unaudited management accounts. The profit was
calculated as the after tax operating profit of each property after tax and does not take into account
the impact of the capital structure, rental smoothing and any impairments.
9.3. The Company is satisfied with the quality of Steinhoff’s management accounts, however, shareholders
are advised that these management accounts are unaudited.
10. CLASSIFICATION OF THE TRANSACTION FOR PURPOSES OF THE JSE LISTINGS
REQUIREMENTS
10.1. The Transaction constitutes a small related party transaction for Pepkor as contemplated by paragraph
10.7 of the JSE Listings Requirements given that:
10.1.1. Steinhoff N.V. and the Steinhoff Subsidiaries are “related parties” of Pepkor by virtue of the fact
that Steinhoff N.V. is indirectly a material shareholder of the Company; and
10.1.2. the number of the Pepkor Consideration Shares to be issued by Pepkor to the Steinhoff
Subsidiaries as a percentage of Pepkor’s shares in issue (excluding treasury shares), equates to
1.91%.
10.2. Pepkor is accordingly required to appoint an independent expert to prepare a fairness opinion on the
Transaction in terms of paragraph 10.7(b) of the JSE Listings Requirements to confirm that the
Transaction is fair to shareholders of the Company.
10.3. The board of directors of the Company has appointed PSG Capital Proprietary Limited (“Independent
Expert”) as the independent expert to prepare the required fairness opinion on the Transaction. The
Independent Expert has considered the terms and conditions of the Transaction and is of the opinion
that the terms and conditions of the Transaction are fair to the shareholders of the Company. A copy
of the fairness opinion is available for inspection at the Company’s registered office for a period of 28
days from the date of this announcement.
11. SECTION 60 CIRCULAR TO SHAREHOLDERS
As contemplated in paragraph 4.1.2.2 above, approval by the shareholders of the Company is required
in terms of section 41(1) of the Companies Act for the issue of the Pepkor Consideration Shares to the
Steinhoff Subsidiaries as a result of the fact that the Steinhoff Subsidiaries are related or inter-related to
the Company, as contemplated in section 2 of the Companies Act. This approval will be sought as a
written resolution of Pepkor shareholders in terms of section 60 of the Companies Act. In this regard, a
circular detailing the Transaction and incorporating a notice of the required written resolution to be voted
on by Pepkor Shareholders, will be distributed to shareholders on or about 18 January 2021.
18 December 2020
Equity Sponsor Legal Advisor to Pepkor
PSG Capital ENSafrica
Debt Sponsor
Rand Merchant Bank (A division of Firstrand Bank Limited)
Date: 18-12-2020 02:15:00
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