JOHANNESBURG (Reuters) – South African tycoon Christo Wiese on Friday called off plans to sell his stake in grocer Shoprite (SHPJ.J) to Steinhoff’s African arm (SRRJ.J), a day after he resigned from Steinhoff’s board in the midst of an accounting scandal.

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More than $10 billion has been wiped off retailer Steinhoff’s market value in the last two weeks following the disclosure of accounting irregularities and also its chief executive’s exit.

Steinhoff, owner of more than 40 retail brands including Conforama, Mattress Firm and Poundland, in August revealed plans to buy a controlling stake in Shoprite through its African spinoff Steinhoff Africa Retail in a share deal worth 35.5 billion rand ($2.68 billion).

Wiese, the largest shareholder in both companies at that time, had said that he wanted to do this deal to consolidate his holdings.

The decision to call off the sale follows Wiese’s decision to quit as chairman of Steinhoff to reinforce independent governance and address any possible conflict of interest.

 Steinhoff named Heather Sonn, a member of the supervisory board and its independent sub-committee, as acting chairperson.

The crisis has tarnished Wiese’s credentials as one of South Africa’s most respected stewards of shareholder capital, stripped him of his billionaire status and reduced his 22.8 percent stake in Steinhoff to 20.5 percent.

Banks have sold 98.4 million of the shares they used as security to lend Wiese 1.6 billion euros ($1.89 billion) to fund the purchase of additional shares in Steinhoff in September 2016.

Steinhoff did not name the bank or banks that have exercised their security rights over the stock. Citigroup, Goldman Sachs, HSBC and Nomura provided financing, which was backed by 628 million shares, or 15 percent of the company.

Steinhoff, which moved its primary share listing from Johannesburg to Frankfurt two years ago, has been under investigation for suspected accounting fraud in Germany since 2015. Four current and former managers are under suspicion of having overstated revenues at subsidiaries, prosecutors said.

It has previously said that the investigation related to whether revenues were booked properly, and whether taxable profits were correctly declared.

Steinhoff’s shares fell a more than 8 percent on Friday in Johannesburg and Frankfurt.

SHPJ.JJOHANNESBURG STOCK EXCHANGE
-1,353.00(-6.05%)
SHPJ.JSouth Africa’s Independent Regulatory Board for Auditors (IRBA) said on Friday it was investigating Steinhoff’s auditor, Deloitte South Africa, for the audits of financial years ended 2014-2016.

LIQUIDITY HOLE

Steinhoffs Africa Retail said earlier on Friday it was preparing to repay $1.2 billion it owes to its parent, a move that would go a long way to plugging a $2.4 billion liquidity hole in the group.

Steinhoff Africa Retail appointed FirstRand’s Rand Merchant Bank to arrange the refinancing of about 16 billion rand ($1.19 billion) in shareholder loans from the parent company.

Steinhoff is working with turnaround specialist AlixPartners to help maintain its liquidity. The company said on Friday it reduced its 25.5 percent stake in local investment conglomerate PSG Group (PSGJ.J) to 16 percent, raising 4.7 billion rand.

Reuters had reported on Tuesday that Steinhoff was also considering selling its stakes worth $1.4 billion in PSG Group and the KAP Industrial to fill the hole in its balance sheet.

Steinhoff has also has also hired U.S investment bank Moelis & Co to help it prepare for a delayed meeting with lenders in London next week to discuss its financial health.

Reporting by Tiisetso Motsoeneng, additional reporting by Nqobile Dludla; Editing by Keith Weir and Jane Merriman

8 COMMENTS

  1. Weise tendered to resign from the company’s Supervisory Board In a securities exchange declaration. Though the company did not specify if Weise will reside on as interim CEO, in their announcement, it’s still very unlikely that he will keep on with his designation amidst the conflict of interest issue highlighted by the company.

    • The corrupt act at Steinhoff has left the whole nation into a Shock stage and whilst the silence of major business authorities is point to be discussed, many investigative agencies have started their legal proceedings against the controversial firm.

    • Evidence will show that Markus Jooste and Steinhoff ran the biggest corruption scheme in 2017. We will leave no stone unturned in the fight to end the corruption of white monopoly capital.

  2. It’s worth mentioning here that Steinhoff’s CEO Markus Jooste has already resigned two weeks back under the allegations of tax fraud and corruption.

    • Moreover, company’s share price has doomed down to all time lows after a series of investigation Initiated by German authorities on illicit accounting and tax fraud charges.

    • R17 billion is not small change. Furthermore, those who parceled out public funds to white monopoly capital, such as Pravin Gordhan and Mcebisi Jonas, must account for this grand corruption.

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