Pepkor-king Wiese calls claims against him ‘insane’
Conflicting views on speciality unit sow division as attempts are made to cut brands from Steinhoff
● Christo Wiese is not pulling any punches when it comes to defending his legacy, refuting claims that he knew about the accounting irregularities at Steinhoff as “insane”.
Wiese, the largest shareholder in the crumbling retail empire, has rejected claims about his role in imploding the retail empire.
“Can you imagine someone knowing the statements for which he is acting have been falsified but willingly writes a cheque for R59-billion to invest in that? I find it ludicrous that people can’t see this,” he said.
Wiese made significant losses in Steinhoff after it lost over 90% of its value, putting it in the top three worst-performing companies on the JSE this year.
But when he issued a summons against the retailer for about R59-billion in cash investments made in 2015 and 2016, which were backed by Steinhoff shares, the market grew suspicious.
Wiese has been the primary advocate of restructuring the business’s African unit, which includes crown-jewel Pepkor.
He joined Pepkor when it had just five stores but built up the company to a value of almost R63-billion, the amount Steinhoff paid for it in 2015. Star, which houses Pepkor, has found it difficult to shake off the issues surrounding its parent company.
Despite this, Wiese told Business Times that from a Pepkor perspective, Star was an “excellent business with good management”. He added: “As far as I know, the other businesses in Star are also good, but I don’t know them as well as I know the old Pepkor, so it’s difficult to say that those businesses have the same quality.”
On the question of whether Star would consider selling its non-core assets, Wiese said: “I have no knowledge of that, but I suppose it is possible.”
But the legacy of the man who built a retail empire may depend on Star’s survival.
“I would hope people will have a balanced view when the lawyers have debated and all the facts are on the table, so that they can look at the whole history,” he said.
● From the vestiges of Steinhoff International there’s one asset above all in which stakeholders are interested. It’s the company’s controlling stake in its African operation, Steinhoff Africa Retail (Star), and in particular Pep stores, which has more than 5 000 outlets.
The Christo Wiese-founded retailer is the jewel among Star’s retail brands.
In trying to distance itself from the ruinous reign of the Markus Jooste-led parent, it’s not surprising that Star has chosen to rebrand itself as Pepkor.
The dual-listed Steinhoff has been brought to its knees since last December’s revelations around accounting irregularities to the tune of billions of rands. The stock has plunged more than 90% this year and now trades at its lowest levels yet. Its Johannesburg-listed subsidiary has fared far better, gaining almost 16% this year, reflecting the higher value placed on the stock.
But in creating Pepkor 2.0 and distancing itself from the largest corporate scandal in South Africa’s history, Star is set to face calls by both stakeholders and investors to look at offloading some “unwanted passengers” that are part of its portfolio.
Braam van Huyssteen, founder of Tekkie Town, which was bought by Steinhoff some three years ago for R3.2-billion and forms part of Star, told Business Times that “the Pepkor boys would be very happy to part with the whole speciality division as I don’t think they see that as a core part of their business”.
The speciality division includes Tekkie Town, Dunns, Sleepmasters, HiFi Corp, Timbercity and Refinery. The divisions account for 20% of the group’s revenue.
Van Huyssteen is chairman of the speciality unit within Star.
Star’s management team consists largely of former Pepkor management when it was a standalone business before being sold to Steinhoff in 2015.
“You can see from their behaviour they want to cut all ties with non-Pepkor business,” said Van Huyssteen, who launched legal action to have the sale of Tekkie Town to Steinhoff scrapped.
But Star chairman Jayendra Naidoo said the group had no such plans.
“All the businesses that are currently in Star will continue to be owned by the renamed company,” he said.
Naidoo, who once sat on the embarrassed Steinhoff board, said they weren’t looking at selling any of Star’s existing businesses “at this point”.
Van Huyssteen believes the speciality unit has already made inroads in terms of a turnaround strategy, but said the management style of Star had “alienated” senior managers.
In response to Van Huyssteen’s claims Naidoo said: “These appear to be mischievous noises being planted in the media by someone with some untoward agenda. For the record, everything is going well at an operational level in all Star businesses.”
However, Van Huyssteen insisted: “A future for Tekkie Town or the speciality division within the confinement or the boundaries of Star or Pepkor is an impossibility. I cannot see it happening.”
Van Huyssteen said the commercial future of Star looked uncertain given the issues with leadership.
“I would think that Dr Wiese may have another look at Pepkor but that he would look at it from a situation where he might acquire the business from Star and make some wholesale changes to some of the key positions. He has realised that there are leadership issues at Star,” he said.
Wiese has previously said he wants to buy Pepkor back after having sold it for R62.8billion.
Asked about the influence former Pepkor management has at Star, Wiese said: “The top management of Star are primarily Pepkor people because the businesses in Star are primarily Pepkor, so what would you expect?”
But asked about the view that Star will never shake off its association with Steinhoff, Wiese said: “That’s nonsense. Obviously Steinhoff can sell its stake in Star and that would sever the link between Steinhoff and Star.”
Naidoo said: “Star continues to deepen its autonomy and independence as a listed company while fully respecting the rights of all shareholders.
“Star will continue on the path of high and profitable growth under the new banner of Pepkor Holdings.
“We are now seeking shareholder approval and the completion of all formalities in this regard.”
However, the market wants little to do with anything in the Steinhoff stable.
In a note, David Lerche, a senior investment analyst at Sanlam Private Wealth, said over 90% of the value in Star sat in its two key brands, Pep and Ackermans, both part of the old Pepkor stable.
“These businesses have thrived under various owners over decades, delivering more than 10% growth per year over the past 20 years until 2017,” he said.
Lerche said the market’s remaining concerns centred on three issues: poor disclosure, potential litigation and “unknown unknowns”.
“While disclosure should improve when the next results are released, the outcome of litigation by Tekkie Town’s sellers and the Steinhoff class action suit will take time, as will showing the market that there are no hidden skeletons,” he said.
The Pepkor boys would be very happy to part with the whole speciality division
Braam van Huyssteen
Founder of Tekkie Town