Steinhoff meltdown puts Wiese in hot seat
Christo Wiese, who made his fortune in retail investments Shoprite and Pepkor, has ridden out a few storms in his investment life.
But recovering from the catastrophic collapse in sentiment for Steinhoff will surely be his most daunting challenge. Not only is Wiese a massive shareholder in Steinhoff but as recently as November he was still snapping up single stock futures in the company.
There is then a great deal of significance that can be attached to Wiese stepping (albeit temporarily) into an executive role at Steinhoff. He rarely, if ever, takes on an executive function, preferring to leave the day-to-day running of his investments to dedicated management teams.
Wiese’s elevation to executive was presumably aimed at placating the market in the wake of CEO Markus Jooste’s unexpected departure.
But even the prospect of the veteran investor stepping up to the plate could not prevent the market from dishing out the kind of vicious beating that is rarely suffered by a JSE giant in a single day.
As head of the hastily constituted “supervisory board”, Wiese — along with long-time and trusted Pepkor point man Pieter Erasmus — will need to quickly reinforce the contention (made in Wednesday’s Sens announcement) that “Steinhoff has a number of high-quality, profitable businesses around the world”. The detailed review of Steinhoff’s businesses with a view to maximising shareholder value seems to suggest some form of break-up of Steinhoff might be on the cards.
But the process might be long and arduous. Steinhoff first needs to publish its audited numbers for financial 2017 — especially with irregularities, previously played down by the group, now requiring further investigation with new information that suddenly came to light.
The past 18 months have not been the most rewarding for Wiese. As an investor who has never been afraid to gear up, this could be a most trying time.
The value of Wiese’s shareholding in Brait tanked after the ill-advised First Look acquisition in the UK, while positions in Pallinghurst and Trans Hex Group were further eroded.
The value of real estate investments in Tradehold and Texton have also dribbled down — much like the value in industrial counters Invicta and Stellar Capital Partners. But the meltdown in Steinhoff is going to be murder on his net worth.
While it seems Wiese backed the wrong horse (and jockey) at Steinhoff, it is interesting to think that the foray into the group may — at a stretch — be traced back to a small investment in unlisted liquor group KWV. Wiese famously swapped his KWV shares for PSG shares and then later swapped the PSG shareholding for shares in Steinhoff.
The big thrust came when Brait and Wiese sold Pepkor into Steinhoff and most recently there has been the shuffling with Shoprite and Steinhoff Africa Retail.
It’s unlikely, but it may be worth pondering the chances of Brait picking up some of the pieces at scandal-hit Steinhoff as Wiese looks to rebuild his fortune. No doubt the plunge in Steinhoff’s shares will inevitably see the value vultures circling.
More cautious investors will wait for the audited numbers or to see if any of the respected nonexecutives — who include former Sanlam CEO Johan van Zyl, former Absa boss Steve Booysen and experienced director Len Konar — jump ship.