Africa’s largest clothing retailer, Pepkor Holdings Ltd., continues to face questions from certain investors and directors over its July decision to merge its Flash fintech arm with the rival Shop2Shop business without putting the transaction to a shareholder vote.
The combination created a merchant commerce and financial technology company valued at roughly 21 billion rand, or about $1.3 billion, and is widely viewed as a material change in strategic direction for the Cape Town-based group.
The deal gives Pepkor a controlling interest of approximately 57.1 percent in the merged platform, provisionally called FintechCo.
Pepkor reached that stake by contributing its entire Flash subsidiary, which was valued at 10.6 billion rand for the purpose of the transaction, and by injecting a further 1.57 billion rand in cash.
The resulting business is expected to handle more than 200 billion rand in annual transaction throughput across both formal and informal markets, strengthening Pepkor’s long-standing presence among township traders and independent merchants.
Management has presented the combination as a natural extension of the group’s informal-market strategy and as a foundation for its broader financial-services ambitions, including the planned launch of a digital bank.
Critics maintain that the size and strategic importance of the transaction should have triggered a shareholder vote.
According to a person familiar with the board’s deliberations, some directors voted against the decision when it was considered in July.
The individual asked not to be identified because the outcome of the board vote has not been made public.
Separately, an investor has argued that owners of the listed company ought to have been given the opportunity to approve or reject a move that shifts Pepkor further away from its traditional core of discount clothing and toward a larger fintech platform.
Under the Johannesburg Stock Exchange listings requirements the transaction was classified as Category 2 and therefore did not require shareholder approval.
Pepkor has pointed out that the indirect interest held by its chief executive, Pieter Erasmus, in Shop2Shop through associated entities sits below the 35 percent threshold that would have classified the deal as a related-party transaction.
Erasmus’s stake predates his appointment as chief executive in late 2022 and had already been disclosed in the group’s annual financial statements.
He recused himself from all board discussions and decisions relating to the combination.
Independent valuations were obtained for both businesses, the independent directors concluded that the terms were fair and reasonable, and a voluntary fairness opinion was commissioned to support that conclusion.
After implementation, Pepkor holds the majority stake while Shop2Shop founder Peter Berry’s related entities retain roughly 24 percent, Erasmus’s associated interests hold about 13.2 percent, and Shop2Shop management and employees hold the balance.
The minority shareholders have agreed to keep a minimum stake for at least five years, with put-and-call arrangements available as a liquidity path should a planned separate listing of FintechCo not take place in the medium term.
The episode underscores a recurring tension in South African corporate practice between the formal classification rules that allow boards to approve certain large transactions without a shareholder ballot and the expectation among some investors that transformative strategic moves will be put to owners for a direct vote.
While Pepkor has emphasized the independent process it followed and the commercial logic of expanding its fintech footprint, the absence of a shareholder vote on the Flash–Shop2Shop combination remains a point of contention for those who regard the deal as a defining shift in the group’s direction.