Pepkor’s Fintech Merger Faces Shareholder Pushback

As multiple African companies head towards public listings, one deal is attracting attention for all the wrong reasons. South African retailer Pepkor’s R21.3 billion ($1.3 billion) merger with Flash Group’s Shop2Shop—creating a new fintech entity called FintechCo—is facing scrutiny from some directors and investors who believe shareholders should have been allowed to vote on the transaction.

The deal, announced in July, would see Pepkor owning 57.1% of FintechCo while CEO Pieter Erasmus indirectly owns 13.2%, potentially worth R2.8 billion ($170 million) at the current valuation. While JSE rules didn’t require a shareholder vote because the deal is classified as Category 2 (requiring disclosure but not approval), some investors argue that a transaction of this magnitude—especially one where the CEO stands to benefit significantly—should have been put before shareholders.

Background on the Deal

• Pepkor plans to merge its existing merchant services with Flash Group’s Shop2Shop
• The combined entity, FintechCo, will focus on fintech solutions and eventually be listed separately
• CEO Pieter Erasmus stands to own 13.2% of FintechCo through an associated company

Why Investors Are Concerned

While Pepkor maintains it followed all legal requirements, some investors question the lack of shareholder input on a deal that will reshape the company’s strategic direction and where the CEO has a substantial financial interest.

The concern isn’t necessarily about the merits of expanding into fintech but rather about the process by which this major decision was made without direct investor consultation. This highlights an ongoing debate in African markets about governance standards for large transactions, particularly when executive interests are involved.