Stein­hoff fairy tale turns to night­mare on high street

As the re­tail gi­ant grap­ples with an ac­count­ing scan­dal, Ash­ley Arm­strong charts its rise and fall

The Sunday Telegraph - Money & Business - - Business -

‘Ihad never seen any­thing like it, it was like an ebay auc­tion but the bid­ders were play­ing with hun­dreds of mil­lions of pounds,” one banker re­called of Stein­hoff ’s fre­netic rapid-fire bid­ding war in 2016 for French elec­tron­ics re­tailer Darty against ri­val Fnac.

At the time it was con­sid­ered ex­cit­ing, if not un­usual, behaviour for a re­tail con­glom­er­ate. But now that an ac­count­ing scan­dal has left the South African com­pany’s share price and its rep­u­ta­tion in tat­ters many are ask­ing why the warn­ing signs hadn’t been spot­ted ear­lier.

For many share­hold­ers it was the case of fol­low­ing the money and blindly be­liev­ing in the seem­ingly never-end­ing suc­cesses of two wealthy men: Markus Jooste and Christo Wiese.

From 2012 to the end of 2016 Stein­hoff ’s share price tre­bled as it ex­panded ram­pantly out­side South Africa by snatch­ing as­sets in the US and Europe, in­clud­ing Pound­land in the UK. The com­pany be­came a sprawl­ing global £40bn deal­mak­ing gi­ant with over 200 sub­sidiaries in 30 coun­tries.

Long-time friends Wiese and Jooste were in­stru­men­tal in rein­vent­ing Stein­hoff, mod­elled on Jooste’s re­spect for the world’s largest fur­ni­ture com­pany Ikea and its founder Ing­var Kam­prad. “We purely fol­lowed what he did. Our only prob­lem was we couldn’t build a brand, so our strat­egy was to buy the num­ber one or two around Ikea in ev­ery coun­try,” he told South Africa’s Fi­nan­cial Mail in a glow­ing ar­ti­cle just three months ago.

Jooste joined Stein­hoff when it bought a lounge fur­ni­ture maker in 1998 where he was a fi­nance di­rec­tor, but he first met Wiese while as a trainee ac­coun­tant au­dit­ing the books for the bil­lion­aire’s Pep­kor re­tail busi­ness. The man be­came Jooste’s men­tor for the rest of his ca­reer.

Both men were mem­bers of the so-called “Stel­len­bosch mafia”, a group of close-knit Afrikaans-speak­ing busi­ness­men that lived and owned vine­yards in the ex­clu­sive hills around Cape Town. Jooste has claimed 10 of Stein­hoff ’s ex­ec­u­tives are his “best friends”. Both men bot­tle their own wine. Wiese is pas­sion­ate about game keep­ing and has his own re­serve in the Kala­hari. Jooste, whose fa­ther worked for the Post Of­fice, is pas­sion­ate about race­horses and owns and breeds stal­lions all over the world.

Wiese started his ca­reer by tak­ing on the cloth­ing chain his par­ents had founded. Based on the idea that cash-strapped fam­i­lies could dress their chil­dren for less than one rand, equiv­a­lent to 5p, he quickly pro­pelled the fam­ily busi­ness through au­da­cious ac­qui­si­tions, build­ing up his for­tune and a rep­u­ta­tion as a se­rial deal­maker along the way. He turned Pep­kor into a global brand with 3,700 shops world­wide and si­mul­ta­ne­ously ran Sho­prite, the big­gest food re­tailer in Africa.

Wiese is also the big­gest share­holder in Brait, the South African in­vest­ment ve­hi­cle that owns a stake in Ice­land Foods, Vir­gin Ac­tive and New Look. Shares in Brait have halved in the last year on the back of New Look’s trou­bled trad­ing and been knocked by Stein­hoff ’s re­cent trou­bles. The firm in­sists that it has not been caught up in Stein­hoff ’s ac­count­ing scan­dal and has had no in­di­ca­tion that Wiese wants to sell down his stake, de­spite him selling shares in other hold­ings.

Wiese was al­ready a ma­jor share­holder in Stein­hoff when it bought Con­forama in France in 2011 for £1bn, the start of its ac­qui­si­tion spree fi­nanced by cheap debt. By the time Stein­hoff splurged £4bn on the takeover of Pep­kor three years later it was al­ready one of Africa’s big­gest

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