Despite the looming court drama that will follow the Restraint of Trade affidavits and Pepkor’s IP claim against the use of the Mr Tekkie name lodged in the Cape High Court, the first Mr Tekkie store is opening in the St George’s Mall, Cape Town, next week. It will be housed on the premises of a former Tekkie Town store, which was evicted after Pepkor’s property division failed to renew the lease. This will be followed by two more stores in Bloemfontein and Acorn Hoek this month, and twelve more next month.
Last week, Pepkor’s top management came under the spotlight in affidavits filed by the former Tekkie Town (TT) shareholders in response to Pepkor’s Restraint of Trade application against them in the Cape High Court. It reads like a Succession TV series script, with some startling revelations.
An offer he didn’t understand
For example, in June, STAR/Pepkor chairman Jayendra Naidoo tried to strong-arm him to accept a soft loan to buy back Tekkie Town, former Tekkie Town (TT) CEO Bernard Mostert testified. When he declined the loan offer because he believed it wasn’t commercially sensible in the highly fraught environment surrounding Steinhoff and its subsidiary, STAR/Pepkor, three Pepkor executives who had an acrimonious relationship with the TT team were appointed to the TT board – without the knowledge of Mostert or COO Dawie van Niekerk.
When Mostert complained, Naidoo indicated that this could be stopped should they accept his offer. “I took this as a rather blunt attempt to blackmail me: unless I concluded a deal on Naidoo’s terms – i.e. with a soft loan – I would suffer the same ignominious exit as had been meted out to Van Huyssteen (see below),” Mostert said in his affidavit.
One of these board members, Corné Klem, subsequently replaced Mostert as CEO of Pepkor Speciality: Footwear and Fashion, despite having agreed with Van Niekerk that he didn’t believe Pepkor CEO Leon Lourens had the ability to handle the TT crisis appropriately. According to Van Niekerk he also said that the old Pepkor managers considered themselves to have a similar case as TT against Steinhoff and Christo Wiese and that they intended to pursue their claim against Wiese directly.
Mostert says Steinhoff Africa Retail (STAR) listed on the JSE in September 2017 as a vehicle for Steinhoff to isolate its valuable African businesses (e.g. Pepkor and TT) from the legal turbulence created by Andreas Seiffert for its European businesses. Although the name changed back to Pepkor in August, the company is still owned by Steinhoff, who holds 71% of the shares.
Pepkor declined our request for comment “as it pertains to an on-going legal process. The truth will be revealed in due time when this matter goes to court”.
Some are more equal
Van Niekerk says Klem also claimed it was absurd to expect Pepkor (then still STAR) to honour the performance-based earn-out (bonus scheme) for Speciality staff members agreed to when Steinhoff bought TT as it would cost them a quarter of their profits – despite the former TT management achieving a remarkable 16% growth for the former loss-making Speciality division.
Furthermore, Klem allegedly told Van Niekerk that the Pepkor old guard were talking to Remgro and other banks to rescue their Business Venture Investments (BVI) scheme, through which they bought Steinhoff shares, to cover the losses they suffered when the Steinhoff shares lost their value. The Remgro financing didn’t materialise, but at the STAR results presentation on May 29, Naidoo confirmed that the company would honour the loans and guarantees to the Pepkor managers who bought Steinhoff shares.
Klem also allegedly said that the BVI incentivisation could result in executives earning up to nine times their annual salary, based on their impact on the business. He indicated that Van Niekerk could share in this bounty if he made the right choice.
No shares today
Although TT traded as part of STAR/Pepkor since September 2017, the former TT shareholders received no STAR/Pepkor shares.
In 2016 the TT shareholders exchanged their TT shares, then valued at R3.2-bn, for what they were told was an equal value in Steinhoff shares – with the proviso that they were not allowed to sell the shares (which soon became worthless) for three years. When Steinhoff transferred TT to STAR before the listing it in September 2017, none of the TT executives received STAR shares, nor did they succeed in exchanging their Steinhoff shares for STAR shares.
The former TT shareholders were also excluded from the STAR share grant allocation offered to Pepkor employees – even though their names were on an initial list of recipients drawn up in November 2017. Lourens gave the disputed earn-out agreement as a reason why the Speciality (former TT) executives were excluded from the STAR share allocations offered to Pepkor employees, Mostert said in an affidavit.
According to Mostert’s affidavit it is apparent that Steinhoff, in collaboration with the applicants, in fact swindled the former shareholders out of their shares in Tekkie Town … and that they received nothing but fool’s gold in return.
Appointing his own team
According to Mostert it was clear that Pepkor CEO Leon Lourens wanted to replace the former TT management with Pepkor managers – even though they were delivering excellent results. After Steinhoff appointee Ben la Grange was replaced by Pepkor’s Leon Lourens as CEO in January, he appointed long-term Pepkor employee (and his friend, according to Mostert) to oversee several divisions, including the STAR Property division, chaired by Van Huyssteen, Mostert claims.
When Mostert asked Lourens to mediate to convince 23 Speciality and TT managers to withdraw their resignations, Lourens had brought a new team to George to step into the ex-TT roles, as if he anticipated that the negotiations would fail, Mostert claims.
Despite the hostility of the employees towards Lourens, Mostert managed to negotiate a week-long moratorium to address the issues of the staff members who resigned – and some did withdraw their resignations. But then, Pepkor appointed new people in key positions before the moratorium had run out. During this time Klem, Brand and Estelle Morkel, who were not TT-friendly, were appointed to the TT board, without any consultation with Mostert or Van Niekerk (see above). Mostert could also not understand what contributions they could make to the running of the company.
When Mostert and Van Niekerk resigned at the end of June, claiming constructive dismissal due to a hostile environment, it triggered a mass walk out of 117 staff members, including most of the top management. Klem was appointed in Mostert’s position.
The Braam factor
Although no longer involved in the day-to-day running of Tekkie Town, Van Huyssteen was a mentor and role model for most staff members. Especially the many whose families had been assisted by him in his private capacity or received support in other ways over many years. For them, Tekkie Town and Van Huyssteen were inseparable, and they were one big happy family.
Some Pepkor executives, with whom Van Huyssteen had disagreements about unfavourable lease agreements, had a different view. And they complained to Lourens.
In April Lourens in an email asked Van Huyssteen to relinquish his role of chairman of STAR’s property committee and his position on the EXCO of STAR. “I am unwilling to relinquish my role and am excited about what I can achieve if my role is not obstructed,” Van Huyssteen responded in an email, in which he also mentioned that he could help fix STAR’s “shortcomings and cost leakage in its property division.”
Several emails between Van Huyssteen and Lourens culminated in Lourens’ terse instruction to him on April 19 “… you are specifically instructed to no longer use the title of “Chairman STAR Properties” as your email signature.
Van Huyssteen read this as a termination of his services – although Pepkor subsequently said in a statement that he resigned and that they therefore removed him as director and chairman of the board of Speciality.
Enter Mr Tekkie
Mostert and Van Huyssteen have different views about repurchasing TT. Mostert, who was negotiating with Naidoo about it until shortly before he resigned, is still hoping that they will succeed in getting TT back – and is therefore very upset about actions such as the humiliating treatment of a TT employee who was made to stand in a BayWest Mall store window with a derogatory sign around her neck, which he considers harmful to the brand name.
Van Huyssteen says he has no interest in dealing with stolen property and that he will not buy back what is rightfully his – instead, he turned to the courts to have the sale overturned.
He also began putting plans in motion during June to start a new chain, for example, buying the Mr Tekkie name from Reinhard Barnard of Model Sports in Worcester, who registered it for his franchises in 1999. The first stores are opening next week (see above).
He is adamant that the full lifestyle offering of the Mr Tekkie stores will be vastly different to the discount shoe profile of Tekkie Town, as he believes the two chains will have to operate side-by-side in the same stable one day.
Van Huyssteen is also in a partnership that is busy redeveloping the Brightwater Commons shopping centre in Randburg into a 53,000m² mixed-use development. He had bought the property from The Allan Gray Property Trust in 2007 and subsequently sold undivided shares to the Moolman Group and PHG. Some of the tenants of the 23 000m² community shopping centre due to open next year will be Pepkor stores.