Steinhoff buys back 78 million shares for R4.7bn
LISTED retailer Steinhoff International has repurchased more than 78 million of its shares, representing 1.8 percent of its issued share capital, for €294 million (R4.7 billion).
The company also told shareholders yesterday that shares acquired or held by subsidiaries would be treated as treasury shares and accordingly reduced the number of voting interests to 4 231 343 966 shares.
“Shareholders of Steinhoff are hereby advised that the company informed the authority for financial markets in the Netherlands that the management board of the company has undertaken share buy-backs under the authority granted by shareholders,” the group said.
Jordan Weir, an equities trader at BayHill Capital, said shareholders should not expect anything particularly significant in the near term with regard to this share buy-back.
“As it has been treated as treasury shares, voting rights and dividend payouts fall away from those roughly 78.3 million shares, indirectly giving current shareholders a fraction more dividend income and voting power per share than they currently hold. This is obviously favourable to the underlying shareholder,” Weir said.
Last month the group released a trading update in which it said its European household goods segment remains on track to deliver good operating profit growth for the 12 months to end September. Sales increased 48 percent to 14.9 billion for the nine months to end June, boosted by organic sales and the integration and sales development of the acquired businesses. The group said organic revenue, excluding acquisitions, increased 8 percent and was led by good growth in the European and African regions.
Weir said treasury shares meant that a company felt that its shares could be currently below intrinsic value and wished to participate in capital growth.
“If a company wants to ensure that it can more easily create cash on hand by selling shares back to the public at a certain future date, while enjoying underlying capital gain/growth in the interim; or lastly and, in rare instances, a company wants to maintain a controlling share interest in order to help fend off potential future hostile takeovers,” Weir said. “Given the current price action of Steinhoff’s share price, one could err on the side of Steinhoff possibly picking up stock at levels that they may believe to be below current intrinsic value.”