Steinhoff sinks as investors sue for R185bn in losses

EMBATTLED retailer Steinhoff International sunk deeper into the red as its shares fell on a R185 billion class-action lawsuit from investors who wanted to recoup losses suffered after the retailer wiped off R200bn in the market value in December.

Steinhoff extended its losses on Friday morning, surrendering 13 percent in early trade to R2 from Wednesday’s closing price of R2.34 when the consortium of lawyers approached the South Gauteng High Court with the lawsuit. The stock closed 5.1 percent weaker to R2.22.

The recent application was brought by Johannesburg-based LHL Attorneys, Dutch firm Bynkershoek Dispute Resolution and German firm TILP Litigation. It names as defendants the Dutch incorporated Steinhoff International Holdings NV; its South African predecessor, Steinhoff International Holdings; as well as three banks – Absa, Germany’s Commerzbank and the UK-based Standard Chartered Bank – and the auditors that assisted Steinhoff with its Frankfurt listing, Deloitte and Rödl & Partner.

Mark Hodgson, an analyst at Avior Capital Markets, said the lawsuit filed in South Africa against Steinhoff International legal entities will be complex and it includes various directors, auditors and financial intermediaries as respondents.

“If this lawsuit were to be successful, depending on the amount awarded and no appeal lodged, then it would have the potential to result in bankruptcy for the group,” he said.

“Steinhoff, in terms of lock-up agreements, recently concluded it is likely to be disposing of further group assets in any event,” Hodgson added.

Veronica Vurgarellis, litigation partner at Hogan Lovells, said in the event that the courts ordered payment of an amount that the responsible party was unable to pay, then application could be made for the liquidation of the debtor companies.

“However, sale of assets may be an option, but not the only option,” Vurgarellis said. This was not the first lawsuit that Steinhoff had been facing since its admission of accounting irregularities.

In April, former chairperson Christo Wiese lodged a R59bn claim against Steinhoff related to cash investments made by the Titan Group in the company between 2015 and 2016.

Also, a unit of its local subsidiary, Pepkor Holdings, was at loggerheads with former Tekkie Town executives who resigned in June in respect of an earn-out agreement allegedly reached with Steinhoff International.

Bernard Mostert, a former chief executive of Tekkie Town, said his lawsuit would put the company at real risk of bankruptcy: “There are, of course, already several other claims which are different in nature to this claim. Our claim seeks restitution whereby we are calling for the return of shares in Tekkie Town we sold in exchange for shares we received from Steinhoff and which could not be sold for a period of three years.”

Webber Wentzel, acting on behalf of the consortium of former Tekkie Town executives, estimates that the earn-out would be about R455 million to R890m at the expiry of the scheme in September 2020.

Vurgarellis said the lawsuit was expected to continue for many years.