THE BOTTOM LINE
Take it down, Tekkie Town ... Star misery goes on
Steinhoff Africa Retail (Star) share price plunges as execs walk out of its shoe-retailer subsidiary
Steinhoff Africa Retail (Star) has identified 10 “strategic drivers”, which it says are “critical elements” that help determine its success and plans for the future.
“An experienced management team and loyal and committed employees” is the tenth of these drivers. Executives and employees of Star subsidiary Tekkie Town may beg to differ.Tekkie Town, a discount footwear retailer with 368 outlets across SA, does not feature large in Star’s life; it is part of a division that contributed just 4% to group revenue in 2017. This might make it difficult to understand the 3% plus fall in the Star share price on the news of the walkout of key “not-so-loyal” Tekkie Town executives.
The problem for Star executives and shareholders is that, much as they might wish, it will take a lot more than a change of name to free it from association with Steinhoff.
At the heart of the Tekkie Town dispute is an earn-out agreement its executives say was put in place at the time of the sale to Steinhoff. The fact that many of these executives, who built up this business, are now sitting with almost useless Steinhoff shares is heightening their sense of injury.
From an investor perspective the earn-out might look a little too much like the R500-million needed to cover the executives’ incentive scheme. It won’t involve as much money but it’s another guarantee that only insiders knew about.
The latest Tekkie Town drama reminds everybody that Star could be littered with these sort of expensive guarantees.As for Star and Tekkie Town founder Braam van Huyssteen’s ability to kick Tekkie Town out of its premises in George, why was there no disclosure of a related party agreement that generated R12-million income a year for Van Huyssteen?
Perhaps the details are also buried somewhere in Star’s public statements.