According to Moneyweb, Pepkor has combined its Flash fintech arm with rival platform Shop2Shop to create a new entity valued at roughly R21 billion (about $1.3 billion). The merger was approved by the board in July but did not involve a shareholder vote.
Pepkor will hold 57.1% of the enlarged fintech group, while chief executive officer Pieter Erasmus will own a 13.2% stake worth about R2.8 billion based on the implied valuation. Erasmus, who previously held a minority position in Shop2Shop, recused himself from the board deliberations, the company said.
Governance concerns
Some directors voted against the transaction because they believed shareholders should have been consulted. Aeon Investment Management, a top-30 investor with a 0.4% holding in Pepkor, echoed the view. Its chief executive officer, Asief Mohammed, said seeking shareholder approval would have demonstrated better corporate governance and suggested a voluntary, non-binding resolution as an option.
The deal does not require a shareholder vote under Johannesburg Stock Exchange rules, as it falls below the exchange’s threshold for a related-party transaction. A related-party transaction is one where a party to the deal has a close connection to the company, such as a director or major shareholder, and the JSE sets a monetary limit that triggers a mandatory vote.
Pepkor says it obtained independent valuations of both businesses and an independent fair-and-reasonable opinion. The move is part of a broader strategy to grow beyond its core discount-retail operations. Flash serves about 170 000 informal traders with services such as airtime and prepaid electricity, while Shop2Shop reaches more than 210 000 users. The combined entity, tentatively called FintechCo, is expected to list on the JSE in the medium term.
Pepkor’s share price has fallen 31% this year, underperforming the FTSE/JSE Retailers Index, which is down 25%. The governance debate adds another layer of risk for investors watching the retailer’s shift into financial services. Markets & Finance
According to a person familiar with the board proceedings, the vote on the Flash-Shop2Shop merger was not disclosed because the directors cited confidentiality, meaning the exact count of those who supported the deal remains unknown. This lack of transparency has fueled speculation among market watchers, especially as the transaction represents a strategic pivot for Africa’s largest clothing retailer. The source added that the merger could still see adjustments to the ownership percentages before finalisation, highlighting that Erasmus’s 13.2% stake valued at roughly R2.8 billion might be revised as the deal moves through the closing stages.
As Aeon Investment Management’s chief executive Asief Mohammed explained, Pep-kor could have presented a voluntary, non-binding shareholder resolution, allowing investors to voice opinions without obligating the board to alter the transaction. Such a mechanism would let shareholders express concerns while keeping ultimate decision-making with directors, a practice sometimes used when a deal falls below mandatory voting thresholds but still carries significant governance implications.
The JSE’s related-party transaction rule sets a monetary limit that, if exceeded, forces a shareholder vote. Because the Flash-Shop2Shop combination does not meet that threshold, the board was legally permitted to proceed without a formal poll. Nonetheless, the rule defines “related-party” as any party with a close connection, such as a director or major shareholder, and the exemption applies only when the transaction value stays under the prescribed ceiling.
Independent valuations were obtained for both Flash and Shop2Shop, and an independent fair-and-reasonable opinion was secured, according to Pepkor’s statements. These external assessments are intended to demonstrate that the pricing of the merged entity reflects market standards, a step often taken to mitigate concerns about potential conflicts of interest when a chief executive holds a personal stake in the outcome.
Flash’s platform currently serves about 170 000 informal traders, offering products like airtime, mobile data and prepaid electricity, while Shop2Shop reaches more than 210 000 users with its payment solutions. By merging the two, Pepkor aims to broaden its payments, lending and merchant-commerce capabilities, and to lay the groundwork for a future digital bank that could tap into the informal sector’s growing demand for financial services.
The medium-term plan to list the combined fintech entity, tentatively named FintechCo, on the JSE remains unchanged. Once listed, the company will be subject to the exchange’s ongoing disclosure and governance requirements, meaning that any future material changes to ownership structures or strategic direction will need to be communicated to shareholders and the market in accordance with JSE rules.
