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What price a lifetime’s work? – Whitey Basson’s R1.8 billion nest egg

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Whitey Basson

Forty years of hard work, constant strategising and little sleep have left former Shoprite group executive Whitey Basson a little tired – and R1.8 billion richer. He’s exercising his option to sell his shares and gearing down to enjoy more leisure time and contemplate how many ways he can spend the dosh. Observers in the financial markets and retail are being generous, saying it may seem like a lot of money but he’s entitled to it, having built the retailer into the African giant it is today. Taking what represents just 1.447% of the issued shares of the group is no big deal, considering how much shareholders made. A few say the suddenness and the quantum will impact on minority shareholders. Cosatu says he’s being paid for exploiting workers on behalf of shareholders – which could apply to any corporate executive. Shoprite’s largest shareholder, with a 12,6% stake, is the Public Investment Corporation (PIC), which oversees government workers’ pensions. The move has rattled all shareholders and the share price dropped. Basson says he’s going nowhere, is not shifting the money overseas and can think of no better place to live than South Africa. He handpicked his successor, whom he says is doing better than he did. – Chris Bateman

By Nellie Brand-Jonker

Cape Town – He is not upset with Shoprite and he is not fleeing South Africa, said former group chief executive Whitey Basson about the R1.8bn Shoprite shares that he wants to sell.

“It’s just to diversify my own interests. I have reached retirement age.”

The Shoprite group announced on Friday that it is obliged to repurchase 8.68 million shares from Basson in terms of an employment agreement concluded with him in 2003.

Household goods sit on display shelves inside a Shoprite Holdings Ltd. supermarket in Alexandra district of Johannesburg. Photographer: Waldo Swiegers/Bloomberg

Basson resigned as chief executive officer of Shoprite at the end of December after being in the position for nearly four decades.

He was succeeded by Pieter Engelbrecht at the beginning of January.

Basson is still employed full-time by Shoprite, where he will serve as deputy chairperson until September.

According to the employment agreement, Basson has the option to sell any shares held either directly or indirectly by himself to Shoprite Holdings while he is still in the employ of the group.

Pieter Engelbrecht, CEO, Shoprite

“Shoprite Holdings is obliged to repurchase such shares,” the company said in a note to shareholders.

Basson notified Shoprite of the exercise of the put option on May 2 at the price of R211.01 per share.

The total value of the shares the company will have to repurchase from Bassgro, of which the Wellwood Basson Family Trust is the ultimate shareholder, is R1.8bn.

The repurchase is subject to the Companies Act, JSE listing requirements and shareholder approval.

“I have no ambition to buy a big yacht or have a second wife or move the money out of (the country); I have many children and grandchildren in the country, ” he laughed when asked to comment on speculation about what he would do with this huge amount of money.

On whether he has any specific plans with the money, he joked: “I’m first going to sit back and look at this pile of cash.”

Basson said he would obviously take the amount of money he is entitled to out of the country each year. “But the idea is not to leave the country or take the money out of it.

“There is nothing sinister about this. This is certainly not a reflection of my view on South Africa. I may not be as optimistic as I should be, but I haven’t found a better place to raise my children and live.”

About certain investors’ views that his desire to sell so many shares shows he has no faith in Shoprite’s long-term future, he said the current management of the group is “doing excellent work, I am very proud of them, they are doing better than me”.

“I’m not upset with Shoprite at all. I even attended one of their meetings today (Tuesday). “

Basson said he himself chose Engelbrecht as his successor.

He said he chose to sell his shares this way because investors think when an “entrepreneur who helped build a company sells” shares in the market, something strange is going on.

About the fall in share price since the announcement, he said there were obviously people saying: “Whitey sold, now we have to sell. You don’t invest because of Whitey; the business is in good hands, ” he said.

To critics who express distaste that one person can make so much money, he said he invested the money and the share price went up. “I worked hard for that. You cannot be angry if someone makes a 100% profit on a home.”

The shares to be repurchased represent 1.447% of the issued shares of the Shoprite Group.

The Shoprite Group said in its announcement that the shares are to be repurchased through existing bank facilities, and this will increase its interest by R144m a year.

Basson said the company does not have to pay interest, and that it could resell the shares.

Shoprite stock at one stage dropped nearly 4% compared to the price before Basson’s announcement.

Peter Armitage, chief executive of Anchor Capital, said he doesn’t think this reflects a vote of no confidence in Shoprite. “The point is it is a startling amount of money. But when someone leaves a business, it is reasonable for him to invest elsewhere. He is entitled to unlock value.”

FNB Securities portfolio manager Herman Lloyd believes the main reason for the price drop was that the market took fright at the size of the transaction. “The market may think that Whitey does not see much further growth in the business. I’m personally not too worried; people sell for many reasons.”

Simon Raubenheimer, Allan Gray portfolio manager, said: “Yes, it is a big amount. But it’s a consequence of the tremendous value that Whitey has added over many years. Had he done a poor job, it would have been a small amount. I don’t think the quantum is an issue.”

However, he added: “Whitey knows this business better than anyone. Selling R1.8bn worth of shares is not a good sign, whichever way one looks at it. I would be surprised if this is also, at least in part, not an expression of his confidence in South Africa more generally.”

He thinks the structure might be an issue. “The put option forces the company to buy back shares at what might be a high price, which one could argue is not in minority shareholders’ best interests.”

The amount of shares to be repurchased by Basson’s Shoprite Group is so huge, it would take almost 60 days to sell it in the market, Gryphon Asset Management portfolio manager Casparus Treurnicht calculated.

“It appears that shareholders may see this as excessive behaviour by Basson.

“A more gradual phasing out of its shareholding would have been more appropriate.” – Fin24

Source: http://www.fin24.com/Companies/Retail/im-not-fleeing-sa-says-whitey-about-selling-off-r18bn-in-shares-20170510

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