An end to an era is in sight as Steinhoff shareholders yesterday voted to dissolve and delist the once former billion-rand retail giant from the JSE and Frankfurt stock exchange.
In an extraordinary general meeting held in Amsterdam shareholders supported the company's proposal to delist.
The company also resolved to appoint Steinhoff Topco as custodian of the books, records, and other data carriers of the company, with effect as of the dissolution.
Steinhoff will be given a three-year debt repayment holiday due to its delisting, which comes after creditors approved a proposed debt restructuring plan in May.
Steinhoff owns 44.5% of Pepkor and 75% of European discount retailer Pepco and stakes in US Mattress Firm and Greenlit brands, an Australian furniture seller. The group’s debts exceed its assets by €3.5 billion (R68bn).
Its delisting is a sad day for SA Inc. Steinhoff six years ago was the toast of the town, valued at billions of rands and a must-have in fund managers’ portfolios.
In 2017, the company made headlines for accounting fraud in what is said to be South Africa’s biggest corporate fraud, with its executives facing criminal charges.
But when the multibillion-rand accounting fraud was unveiled, the retailer’s share price crashed and lawsuits ensued of shareholders who complained that they were tricked into buying worthless shares.
Under a new management team the company's goal has been to not go bankrupt. Last year, the company reached a R24bn settlement with creditors.
Mergence Equities head Peter Takaendesa said, “What is always key to know is that it’s difficult for companies to recover from accounting irregularities. Many of these companies end up being unwounded or disappearing.
“The challenge in most cases, once you get into that situation, and you have high debt levels on the balance sheet, and your gearing was high is that in most cases, debt holders, the creditors take over the company and resulting to nothing remaining for equity holders,” he said.
Takaendesa said in the case of Steinhoff, it's not relevant for it to remain listed.
“They’ve tried hard to keep the company alive, but it’s just too much. The challenge that even makes it worse is that we are in an environment of rising interest rates, and when you’ve got very high debt levels, any funder or creditor who comes through, will be demanding even much higher interest. Once the story goes that way, it’s difficult to recover from that,” he said.
Takaendesa said Steinhoff had caused pain to its shareholders and many had lost money.
Steinhoff shareholders had made the right decision to vote to delist as the equity value of the company or the market capitalisation became not worthwhile to remain listed, he said.
“The market cap now of Steinhoff stands at R298 million, Seriously, that's not a lot. You are competing with giants that are worth trillions of rands, like Naspers and Prosus. It's better for it to end this way,” he said.
Takaendesa said what is left for the shareholders now is to discuss what would happen to other listed companies that belonged to Steinhoff.
“In South Africa, Steinhoff is the owner of Pepkor, the owner of Pep stores and Ackermans. They would have to discuss whether to sell or unwind the shareholding,” he said.
Anchor Capital CEO Peter Armitage said he didn't think it was any surprise that Steinhoff was headed to delisting since 2017 when the fraud was discovered.
“It was fairly obvious that there wasn't any equity value in the business left with debt over R180 billion. I think the CEO managed to do a very good and balanced deal in terms of getting some equity value out for shareholders. A few months ago, all the shareholders got paid in proportion of R3 to R5 per share.
“They recovered some cash out of it. But there was a last-ditch attempt to try and reach a compromise where the shareholders would be left with a bit of value, but that was an almost impossible task to get them to agree to that,” he said.
Armitage said though it might seem like the end of an era for Steinhoff, the era ended four or five years ago.
“It's a sad close to a chapter. At its peak, Steinhoff was the number three market cap company on the JSE. It seemed inconceivable that it was just a big fraud. If somebody had said in six years time it's going be delisting and has no equity value, I don't think many people would have believed you,” he said.
Shareholder activist Harry Smit commented on the delisting of Steinhoff and said: “It is a pity.”
He said shareholders must keep a finger on the pulse of companies, attend annual general meetings, and be involved in all company resolutions.
“They must know what they are voting on because that is when red flags on company irregularities show. It is not enough for shareholders to sit back and think that big institutions, such as PSG and Investec, will screen resolutions and find errors in audited statements. It is often the little guy that picks up on issues,” he said.
Smit said: “When we see companies fighting back against share activists like myself, Albie Cilliers, and other shareholder activists, this raises the biggest red flags of all.”
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