Steinhoff raises R3.67bn via KAP

Bookbuild of R8.15 a share

STEINHOFF International raised R3.67 billion through an accelerated bookbuild of up to 450 million ordinary shares in KAP Industrial Holdings at a price of R8.15 a share.

Steinhoff said the book of demand was multiple times oversubscribed.

“The placing price represents a discount of 4.1 percent to the KAP closing price on Monday,” Steinhoff said yesterday afternoon after the closing of the book-build.

The placing shares constitutes approximately 16.7 percent of KAP’s issued share capital, and this will reduce Steinhoff stake in KAP to 26 percent, down from 43 percent. The troubled retailer said yesterday that it was taking steps to refinance or redeem the debt within its South African operations.

The launch of the bookbuild negatively affected KAP’s share price as it declined by 3.16 percent to R8.23 a share on the JSE yesterday morning before ending the day at 0.47 percent higher at R8.54.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the decline of the share price during the day could be partly due to the placement of shares by Steinhoff as well as the general sell-off of domestic stocks so far in the morning.

“KAP shares have lagged the recovery we have seen in other domestic stocks since December 2017 as the market has been expecting Steinhoff to sell some of its 43 percent shareholding in KAP at a discount,” Takaendesa said.

Steinhoff also sold 20.6 million shares in investment firm PSG Group to raise R4.7bn in December as the group tried to raise finance after its market capitalisation declined by R200bn following the admission to accounting irregularities.

The sale of PSG Group shares represented 9.5 percent ofSteinhoff’soriginal25.5percent stake in PSG. About KAP, it said it continued to view the company as a compelling investment, especially in view of recent events in South Africa and the prospect of improving economic conditions.

“On successful conclusion of the placing, Steinhoff will retain ownership of approximately 26 percent of KAP’s issued share capital,

which it views as a strategic investment,” Steinhoff said.

Standard Bank and Investec are acting as joint book runners for the sale and Steinhoff said the book would open with immediate effect and was expected to close as soon as possible. Steinhoff also announced that the shares would be offered to qualifying institutional investors only.

Takaendesa also added that he expected the shares to be oversubscribed as KAP has done well in the past.

In the six months to December results, KAP reported a 25 percent increase in operating profit before capital to R1.40bn, while profit increased by 14 percent to R720m.

Headline earnings an ordinary share from continuing operations grew to 28.3 cents a share, up from 25.5c as compared with a year ago.

“KAP has strong market positions in South Africa, a strong management team and generates solid cash flow. The company has delivered double digit earnings growth over the past few years, despite a tough economic environment, and we expect it to benefit from the expected recovery in the economy,” Takaendesa said.

He added that KAP shares had lagged the recovery in other South African shares due to the overhang created by its 43 percent shareholder Steinhoff’s debt problems and they, therefore, expected this reduction in Steinhoff ’s shareholding to help KAP shares recover.