Bat­tle-scarred Stein­hoff tries to rise again

Trou­bled re­tailer starts new year with a new CEO and a plan to re­struc­ture

Sunday Times - - Business Legal Action - By TJ STRY­DOM stry­[email protected]­day­

● New year, new boss for Stein­hoff In­ter­na­tional af­ter an an­nus hor­ri­bilis of shed­ding as­sets and herd­ing cred­i­tors into deals to keep the bat­tered re­tail con­glom­er­ate afloat.

Louis du Preez, the lawyer who took the reins as CEO last week, has at least two dates loom­ing large on his cal­en­dar, one in Fe­bru­ary and one in April.

Mid-April has been set for the re­lease of the group’s long-awaited fi­nan­cial re­sults.

When the pub­li­ca­tion of Stein­hoff’s fi­nan­cial re­sults was first de­layed early in De­cem­ber 2017 due to “ac­count­ing ir­reg­u­lar­i­ties”, long-time CEO Markus Jooste re­signed and the com­pany’s share price tum­bled more than 90% in a week.

Get­ting au­di­tors Deloitte to sign off those fi­nan­cial state­ments, along with the lat­est year’s num­bers, will be a ma­jor mile­stone for Du Preez and Stein­hoff, but there is lit­tle hope of a full re­cov­ery any time soon.

Fil­ings since Jooste’s de­par­ture have re­vealed the group’s debt to be much larger than pre­vi­ously dis­closed. The val­u­a­tion of some as­sets, such as its Euro­pean prop­erty port­fo­lio, has also since been ad­justed down to more re­al­is­tic lev­els.

The re­sult is a com­pany worth much less than pre­vi­ously thought. Stein­hoff now has a mar­ket cap­i­tal­i­sa­tion of around R7bn, putting it in the league of mid­cap stocks — far from the blue chip it once was.

But be­fore the fi­nan­cial re­sults can be re­leased, PwC needs to com­plete a foren­sic au­dit. The dead­line for the re­lease of PwC’s re­port had long been pegged as end of last year, but has since been pushed out to the end of next month.

“The ex­tent of the wrong­do­ings in terms of mon­e­tary value is still an un­known. It is this that will guide the share price over the next few months. It is com­plete spec­u­la­tion at this point in time,” said Gryphon As­set Man­age­ment port­fo­lio man­ager Cas­parus Treur­nicht.

Mean­while, in­ves­ti­ga­tions into al­leged malfea­sance are un­der way in Ger­many, where Stein­hoff is listed, the Nether­lands, where it is in­cor­po­rated, and SA, where it is head­quar­tered.

Af­ter suf­fer­ing such heavy losses, share­hold­ers are lin­ing up to sue. Sev­eral law firms are work­ing to­gether across ju­ris­dic­tions to in­sti­tute class-ac­tion law­suits against Stein­hoff, its di­rec­tors and other in­sti­tu­tions in­volved, claim­ing around R185bn in to­tal.

Christo Wiese, the re­tail bil­lion­aire whose stake in Stein­hoff dwin­dled to 6% from 23% in the wake of Jooste’s de­par­ture and whose vis­i­ble wealth was halved by the col­lapse, is also su­ing. His fam­ily-con­trolled com­pa­nies are claim­ing R59bn from Stein­hoff.

Wiese sold the low-cost re­tailer Pep­kor to Jooste and his team in 2014 in what was then a record R63bn deal, gain­ing con­trol of Stein­hoff in the process. Part of Wiese’s claim re­lates to the shares his fam­ily com­pa­nies sub­scribed for in Stein­hoff af­ter the deal. The other part re­lates to a cap­i­tal in­jec­tion in 2016 when Stein­hoff made its first foray into the US, buy­ing bed re­tailer Mat­tress Firm for $3.8bn (R52.7bn).

Af­ter the Pep­kor deal, Stein­hoff went on an ac­qui­si­tion binge, lap­ping up not only Mat­tress Firm but also Pound­land in the UK and Fan­tas­tic in Aus­tralia.

Late in 2017 Pep­kor, along with some of Stein­hoff’s other African re­tail as­sets, was listed as Stein­hoff Africa Re­tail (Star) on the JSE.

But the cloud of ac­count­ing ir­reg­u­lar­i­ties and uncer­tainty about the depth of the rot spooked in­vestors, prompt­ing Stein­hoff to dis­pose of as­sets to stay afloat.

Stein­hoff trimmed its stakes in Star and Kap In­dus­trial Hold­ings, sold its shares in PSG Group, dis­posed of Euro­pean re­tailer Kika-Leiner and set­tled a long-stand­ing dis­pute with Aus­trian busi­ness­man An­dreas Seifert over Poco.

Some of Stein­hoff’s sub­sidiaries put some dis­tance be­tween them­selves and head of­fice. The Asia-Pa­cific busi­ness, which in­cludes Fan­tas­tic, re­branded it­self Green­lit Brands; Star re­named it­self Pep­kor; and Mat­tress Firm went into vol­un­tary bank­ruptcy, emerg­ing with Stein­hoff’s stake di­luted to 50.1%.

Nearly all of the group’s op­er­at­ing com­pa­nies have rene­go­ti­ated their fi­nanc­ing.

“There is still a huge chunk of debt at group level. And the sub­sidiaries must pay gen­er­ous div­i­dends to the group hold­ing com­pany to sur­vive. From the pre­vi­ous six-month re­sults it seems like more dis­pos­als will be needed to ser­vice this debt,” said Treur­nicht.

Du Preez has given him­self some breath­ing space, hav­ing ne­go­ti­ated a vol­un­tary ar­range­ment with cred­i­tors that could give him and his team time to re­struc­ture the com­pany. But the ride could be bumpy. A Ger­man com­pany called LSW is chal­leng­ing the ar­range­ment with cred­i­tors, Stein­hoff said on Fri­day.

There is still a huge chunk of debt at group level Cas­parus Treur­nicht Gryphon As­set Man­age­ment

Pic­ture: Reuters

Bed re­tailer Mat­tress Firm, Stein­hoff’s first foray into the US when it bought the com­pany for $3.8bn in 2016, went into vol­un­tary bank­ruptcy.

Louis du Preez

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