Wiese’s claim will give him a say in restructuring
Christo Wiese’s dramatic R59bn claim against Steinhoff will give him a seat at the table when the restructuring of the ailing group is negotiated.
Ironically, the transactions that form the basis of Wiese’s legal claim were severely criticised at the time because of potential conflicts of interest that favoured him over other Steinhoff shareholders.
Experts on corporate governance say Wiese’s claims that he undertook the transactions on the basis of “misleading information” provided by former Steinhoff CEO Markus Jooste have to be viewed in the context of Wiese receiving R30m in chairman’s fees in 2016.
Wiese’s announcement that his Titan Group had served summons on Steinhoff International Holdings, registered in SA, and Steinhoff International Holdings registered in the Netherlands, followed weeks of rumours that he had “lawyered up” in a bid to rescue something from the company’s ashes.
Armand Kersten, head of European relations at VEB, which has instituted legal action against Steinhoff on behalf of a group of shareholders, said Wiese’s move would only have been taken after lengthy discussions with lawyers.
“Perhaps he has a chance, but in terms of Dutch law from the moment he was a member of the Steinhoff board he had joint and several responsibility for the company,” said Kersten.
While most Steinhoff shareholders expressed surprise at the summons, a few were sympathetic and said legal action was the obvious route to take if Wiese believed he was innocent. However, several shareholders said they were appalled by what they called an “opportunistic” move to reclaim the initiative.
In his first claim, Wiese wants the 2015 agreement in which he exchanged his controlling stake in Pepkor for Steinhoff shares to be set aside and his Pepkor shares to be returned to him. The transaction valued Steinhoff shares at R57 and was dogged by controversy and allegations of insider trading, which were dismissed by the company.
Wiese’s second claim relates to Titan’s injection of capital into Steinhoff in September 2016 following the overpriced purchase of Mattress Firm in the US. At the time, Wiese received 162-million Steinhoff shares, trading at R81 each, in exchange for the injection of an undisclosed sum.
The Public Investment Corporation was also a “beneficiary” of this controversial transaction. In addition to the preferential treatment, Wiese received a 2.5% underwriting fee, equivalent to about R550m.
Electus Fund Managers analyst Neil Brown criticised the 2016 deal. He acknowledged Steinhoff’s need for an injection of capital, but said the preferred option for a capital raise would have been a rights offer in which all shareholders would have been treated equally.
Wiese’s legal action, which contends that his investment decisions were based on “misleading information”, is at odds with the general perception that he had a controlling influence on Steinhoff and that many of the
investment decisions were designed to benefit him.
In February, PSG, which offloaded a Steinhoff investment ahead of the December 2017 meltdown, said it had exited because it believed that management had made decisions that were not in the interests of minority shareholders.
PSG’s Shaun le Roux said the decision to sell the shares had nothing to do with concern about Steinhoff’s accounting. “We were concerned about how they were allocating capital. When Steinhoff bought Pepkor at what we thought was 43 times earnings, there were two winners – Christo Wiese and Brait [a Wiese-controlled investment company]. Steinhoff minority shareholders were not on the right side of the transaction.”
Steinhoff announced last week that it was selling its 50% stake in German furniture chain POCO to former business partner Andreas Seifert.
The details of the deal, which valued 100% of POCO at €532.5m, are expected to be finalised this week.
Last Thursday, Steinhoff announced the sale of its 50.4% stake in Hungarian electronics retailer Extreme Digital to the company’s two founders for an undisclosed sum.