Johannesburg - Pepkor chairman Christo Wiese will benefit much more from the recently announced R2.1 billion bid to take Pepkor private than the ordinary shareholders of the company.
The details of the transaction, which have been released, show that Wiese will receive R33.3 million cash and 33.3 million Newco shares, for a total value of over R200 million, in exchange for 97 million Pepkor preference shares with no economic value.
Although they have no economic value, the preference shares have voting power and were a critical aspect of the Pepkor unbundling in the second half of 2000.
The preference shares have enabled Wiese to maintain control of Pepkor, subsequent to the unbundling and the dismantling of the pyramid control structure.
Each of the 97 million preference shares has a vote equal to that of the ordinary shares.
There are 220 million ordinary shares in issue of which Wiese holds 47 million, equivalent to 21 percent.
The combined voting power of the preference and the ordinary shares held by Wiese is 43 percent of the total. The preference shares, held in a private company called Fincom, which is controlled by Wiese, were issued prior to the unbundling at 1c each.
This gives them a total economic value of R970 000.
The transaction document states that Fincom will receive R33.3 million in cash "in respect of the loss of the voting rights" following the redemption of the preference shares.
Newco will issue Fincom with 33.3 million Newco shares in exchange for the preference shares.
This arrangement with Wiese appears to contravene rule 13 of the securities regulation code, which refers to "special deals with favourable conditions".
The essence of this rule is that the securities regulation panel must give consent to any arrangement with a person acting in concert "if there are favourable conditions attached, which are not being extended to all holders of the relevant securities".
However, it is unclear whether or not Wiese can be defined as a concert party.
Asked about the apparent disparity in treatment, Wiese said yesterday that when he was approached by Brait and Old Mutual, "I made it clear that if a deal was to work for me there were two non-negotiables.
"One of these was the issue of control and the other was compensation for the increased perception of risk attached to an unlisted company."
Wiese acknowledged that the proposed transaction only diluted his control from 43 percent to 38 percent. He told them to present him with an acceptable proposal.
"I've no idea how they came to the amount that they did," he said.
Asked if he thought it represented a contravention of the securities regulation code, Wiese replied:
"That's something that they'll have to debate."
Pepkor's stock closed 10c up at R9.85 yesterday.
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