Shareholder activists confident of getting Steinhoff to negotiate

Shareholders will have the first real opportunity to vent their fury today as Steinhoff kicks off with its AGM in Amsterdam. Among the groups present is European shareholder activist outfit VEB, which launched a class action suit against the furniture retailer in February, holding Steinhoff liable for all losses incurred by shareholders. Now it’s set its sights on three banks that advised Steinhoff in the run-up to its Frankfurt listing in 2015: Commerzbank, Barclays and SA’s own Absa. Business Day asked VEB’s head of relations, Armand Kersten: why go after the banks at all?

We do this based on Dutch case law that is cast in stone ... that has gone through the entire judicial system. In a case ruled by the Supreme Court in software company World Online quite a while back, the court ruled all parties, all the banks, had a duty of care. But of course there is also a tactical reason: we are in this to get the optimal compensation for the investor community for what’s happened at Steinhoff. We address all parties that, under Dutch law, take potential liability for the damages that have occurred.

Don’t you have to take into account South African law?

It’s quite simple: Steinhoff is a Dutch company.

But Absa after all maintains that their role was limited to ensuring that the JSE’s listing rules were complied with by Steinhoff SA. Are the banks not a distraction?

It is certainly not a distraction because we have a very firm understanding of the Dutch law. We understand what the law is about and what it is that we can do. The other thing is, it’s not exclusively the banks we’re going after.

All parties that have a potential liability shall be addressed because we think we are justified in finding that all such parties take responsibility. We’re here to make sure fair compensation is ultimately achieved.

Have you quantified what is “fair”?

No, not yet. What we’re instigating at this point in time is a class action lawsuit under the Dutch process. And the system is not yet, at this stage, about calculation of damages. In the proceedings that we’re currently conducting, we gain a so-called declaratory judgment. In that the Amsterdam Court of Appeal will only rule on the matter of the principle of the liability, the principle of causality. As a matter of tactics, what we believe and where we are confident, is that the defending parties who must fear at some stage during these proceedings that it might come to a ruling against them, shall seek to come to the negotiating table since it would be fairly disastrous to them were the courts to actually pass such a declaratory judgment.

Only at the point in time where we’ve got to the negotiating table [will] we look at the calculation of what we believe might be fair compensation.

You must have some sort of figure in mind?

Of course we have figures in mind where we’re talking about the damages that have been suffered. But don’t forget what will be fair will to a very large extent depend on which parties are at the negotiating table.

How many shareholders have joined in the class action so far?

I’m not going to mention any numbers but by any standards it’s really considerable.

You seem to have a considerable track record; are you quite confident you can go after Steinhoff?

The answer is a plain yes. Let me just mention the Fortis settlement: €1.3bn, which was by far the largest compensation for investment damages outside of the US ever.

Your website says you charge a 9% success fee with no upfront costs; is that the total charge and does it mean the rest goes to shareholders?

Exactly that. And our charge is in fact only to be paid ... when damages are awarded. So until and unless we arrive at that stage where we obtain a result, we don’t charge anything. We are capable of doing this for the reason that, based on our track record, we have an extremely healthy balance sheet. We don’t ask for any funding — for example, from third-party financiers — [which] could prolong such action. And we can operate at a very low cost since we have inhouse lawyers who are paid fixed salaries by VEB and that’s a completely different equation from commercial law firms.

We are a not-for-profit organisation with the mere objective of obtaining the best possible results for investors.

Sounds almost too good to be true: just doing the right thing for shareholders?

Yep. VEB is now, for over 90 years, an association and our statutory objective is indeed the promotion of the interests of the investor community at large.

It’s the AGM today — what are you going to say?

We’re going to be vocal. It is not our intention to trigger the bankruptcy of the company. What we will be vocal on is that this is an opportunity the company should take to start coming up with some true facts and figures. The investors have nothing to base themselves on. What we think the company should now start doing is to start saying: what were the irregularities, etc. And get this idea across that it’s simply unheard of that the investor community has been kept in the dark for such a period of time. That is not on. What about the investors that are still sitting in Steinhoff? All they know is that it’s, apparently, a total shambles.