Dear Mr Dago
Steinhoff acquired Tekkie Town. It was then sold into Pepkor (Star) prior to the listing.
The following is disclosed in the 2017 Annual Report:
Page 36: €106 million for the acquisition of Tekkie Town (cash flow impact).
Page 37: Tekkie Town Proprietary Limited (Tekkie Town)
On 29 August 2016, the Company concluded an agreement to acquire Tekkie Town in South Africa. All the required regulatory approvals were obtained and Tekkie Town was consolidated from 1 February 2017. The purchase price of €226 million was settled through a combination of ordinary shares issued and cash paid. Reference is made to note 24.3 to the 2017 Consolidated Financial Statements.
Page 238: Tekkie Claimants v Steinhoff N.V. and Town Investments
• AJVH Holdings Proprietary Limited, Full Team Sure Trande Proprietary Limited, Aquilam Holidings Proprietary Limited, Liber Decimus Proprietary Limited and Xando Trade and Invest 327 Proprietary Limited (“Tekkie Claimants”) have instituted a claim against Steinhoff N.V. and Town Investments based on a written contract entered into between the parties on 29 August 2016 whereby Steinhoff N.V. purchased all the ordinary shares held in Tekkie Town for a purchase price of ZAR3.3 billion (€209.4 million) discharged by the allotment and issuing of 43 million Steinhoff shares. The Tekkie Claimants allege that they entered into the contract based on false and misleading representations made by Steinhoff N.V. and Markus Jooste and claim a return of the Tekkie Town equity or a payment of approximately ZAR1.85 billion (€119 million).
• The Tekkie Town Claimants have also instituted a claim against Pepkor, in relation to contractual earn-out payments of up to ZAR890 million (€57 million). Pepkor denies liability and is defending the action that has been instituted by the sellers.
Page 243: Note 24 details the business combination details.
Page 244: Acquisition of Tekkie Town
Effective 1 February 2017, Steinhoff acquired 100% of the voting rights of Tekkie Town for a purchase price of €226 million (ZAR3.4 billion). The acquisition has significantly increased the Group’s market share in footwear in South Africa, and complements the Group’s existing speciality business in the general merchandise retail sector.
The purchase price was partially settled by Steinhoff issuing approximately 25 million Steinhoff shares and a cash amount of €108 million. The fair value of the shares issued as part of the consideration paid for Tekkie Town (€118 million) was based on the 30 day VWAP on 31 January 2017 of ZAR69.39 per share. Refer to note 30 for details regarding the special purpose vehicle established to facilitate this transaction.
The material fair value adjustments relate to the recognition of the Tekkie Town brand. Deferred taxation was provided at capital rates as the brand was assessed to have an indefinite useful life.
Revenue of €61 million and net profit after taxation of €7 million have been included in the consolidated statement of profit or loss as at 30 September 2017.
The revenue and operating profit of Tekkie Town calculated as though the acquisition date had been at the beginning of the Reporting Period would have been €110 million and €21.7 million respectively.
The fair value of assets and liabilities assumed of Tekkie Town are provisional and were expected to be finalised within the twelve months after the date of the acquistions. The finalisation did not have a material impact on the reported numbers.
Page 264: Tekkie Town and Town Investments
The Group acquired a 100% interest in Tekkie Town in 2 phases as follows:
• A special purpose vehicle, Town Investments, was set up for the purposes of the Tekkie Town acquisition. Town Investments was funded and guaranteed by the Group, but owned by a third party in the Campion Group. Town Investments acquired 43.06% of the shares in Tekkie Town from a previous shareholder for cash which was funded by a loan from the Group to Town Investments.
• The Group then obtained 100% of the interest in Tekkie Town in exchange for Steinhoff shares. The Group issued approximately 18 million Steinhoff shares as consideration to Town Investments for the 43.06% interest in Tekkie Town and approximately 25 million Steinhoff shares to the management of Tekkie Town for the remaining 56.94% interest in Tekkie Town.
Page 312: Acquisition of Tekkie Town
Refer to note 24 and 30 of the consolidated financial statements. The Company initially acquired Tekkie Town in exchange for 43 million Steinhoff shares (of which 25 million were issued to previous Tekkie Town shareholders and 18 million shares were issued to a special-purpose vehicle, Town Investments). This investment in Tekkie Town was reorganised and pushed down to SINVH in exchange for ordinary shares in SINVH amounting to €206 million.
Steinhoff Investor Relations