Queries over Shoprite share repurchase agreement
Publish date: 18 May 2017
Issue Number: 116
Diary: Legalbrief Forensic
After Shoprite’s announcement that it was forced to repurchase R1.8bn-worth of shares from its former CEO Whitey Basson, the attention has now shifted to whether the retail behemoth informed shareholders about this startling move. According to a MSN Money report, the repurchase of Basson’s 8.6m shares has taken shareholders by surprise, given the unexpected liability that it would add to Shoprite’s balance sheet. Shoprite recently told shareholders that it is obligated to repurchase shares in terms of a 2003 agreement with Basson while he was still in the employ of the company. This agreement forces Shoprite to repurchase shares at a price on the date Basson exercised his put option. He exercised his option on 2 May when Shoprite hit an all-time high over the past five years of R211/share. The report says Moneyweb spoke to shareholders who couldn’t locate the specific disclosure or determine its origin. In other words, they hadn’t heard of it. The report says Shoprite didn’t respond to the question about whether it disclosed the put option agreement to shareholders. Shareholder activist Theo Botha said Shoprite’s chair of the audit committee would have a duty to disclose the put option as the liability to Shoprite has been growing over the past 14 years. ‘At the end of the day, it’s about transparency and shareholders have a right to know,’ said Botha.