Steinhoff looking to take control of JD Group

This one was even weirder, perhaps I am the only one here, but perhaps by the end you would understand my rationale. Steinhoff wants to take control of JD Group. They currently own 32.7 percent of the JD Group business. Now Steinhoff also own some KAP shares, it used to be only 34 percent up until last year. It is going to get complicated, so pay attention. Steinhoff swapped their PG Bison, Unitrans and Steinhoff raw materials business in return for "1 912.8 million (new) KAP shares at R2.50 per share", that announcement was on the 18th of October. "And .... KAP credit(ed) a loan account in favour of Steinhoff in an amount of approximately R4 139 million"

So that is the background to the KAP stake. The shares in issue of KAP, post this transaction went up 451 percent. Steinhoff now owned 88 percent of KAP. So surely the minorities of KAP should have got 2.50 ZAR per share? That is what is supposed to happen. But wait, at a General Meeting on the 18th of January, a fairly innocuous announcement which read as follows: "all the proposed ordinary and special resolutions tabled at the general meeting of KAP held today, 18 January 2012, were unanimously approved by the requisite majority of KAP shareholders" would not have raised any eyebrows. Unless of course that you knew, from the October KAP/Steinhoff announcement that Steinhoff had asked the KAP minorities to waive the mandatory offer. So guess what, the KAP minorities voted basically to stay listed, that was last week.

Why is the KAP connection important? Well, Steinhoff plan to pay for the control premium in JD Group using KAP shares, 16 in return for every one JD Group share you have. Steinhoff want to end up with 50.1 percent of JD Group, and to reduce their shareholding of KAP to 62 percent, from the current 88 percent. Well done to whoever (looks like the clever folks from PSG) along with Steinhoff for having dreamt this up. Quite simply, Steinhoff swaps various business stakes for an enormous stake in KAP last year, and then uses those shares to buy control of JD Group. Which they have already sunk some of their existing businesses into JD Group. Question is, why would you want to swap JD Group shares for KAP shares? Not for me to answer, that is for the JD shareholders to decide.