Bailing out Brait’s bosses is a bitter blow for shareholders
Executives created little value over the long term and in recent years have destroyed billions of rands of it
The announcement that Brait shareholders will be forced to cough up R2bn to bail out another executive incentive scheme whose members stood to gain hundreds of millions of rands of profits may have a familiar and bitter feeling to it.
In 2018 shareholders of Steinhoff Africa Retail (subsequently renamed Pepkor) were told they would have to pay R500m to bail out executives who faced multimillion-rand liabilities linked to the Steinhoff share price.
The year before, Shoprite shareholders were faced with the repurchase of R1.7bn worth of shares from former CEO Whitey Basson as the result of a little-known agreement that had existed between Basson and the company.
The familiar thread through all of this is Christo Wiese, who is himself bidding to persuade Shoprite shareholders to pay about R4bn for his Shoprite deferred shares. Wiese, former nonexecutive chairman of Brait SA, owns 35% of its shares.
In the case of Pepkor, shareholders could take some comfort from the fact the executives had generated value and the collapse in the Steinhoff share could not be laid at their feet. All in all it was just a really badly designed incentive scheme.
Over at Shoprite, the repurchase did land shareholders with a hefty bill that will dent profits for some time to come, but Basson helped to create a lot of value. And, importantly, the shareholders did get to vote on the issue.
The situation at Brait is significantly grimmer and leaves a very bitter taste. It is a story of remarkable hubris. The executives created little value over the long term and in recent years have destroyed billions of rands of it.
And, although the proposal involves a specific repurchase of shares (as at Shoprite), shareholders will not have an opportunity to vote on it. Brait is registered in Malta and has its primary listing on the Luxembourg Stock Exchange, so there’s no requirement for a shareholder vote.