South African retailer Pepkor is facing complaints from directors and investors over a deal to merge its fintech arm with a rival company.
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In July, Pepkor announced plans to join its Flash fintech subsidiary with payments platform Shop2Shop, a deal which would create a $1.3bn company with Pepkor owning 57.1% of the new entity.
Flash currently serves 170,000 so-called 'informal traders', enabling them to sell virtual products sucvh as mobile data. Shop2Shop is a similar platform for informal traders with a user base of around 210,000.
According to the complaint, as reported by Bloomberg, the transaction should haver been subject to wider shareholder approval because it represents a significant shift in strategy.
A potential conflict of interest was also flagged by one of the firm's investors, Aeon Investment Management. Pepkor CEO Pieter Erasmus owned a minority share in Shop2Shop and is set to own a 13.2% stake in the enlarged fintech company once the deal is complete.
However, under Johannesburg Stock Exchange rules, the transaction does not require a shareholder vote due to not meeting the exchange's threshold for a related-party transaction.
Pepkor has also stated that Erasmus has recused himself from any decisions concenring the merger.
According to Aeon CEO Asief Mohammed, putting the vote to shareholders would have been "good governance" even if it served just as a non-binding shareholder resolution.