Steinhoff International Holdings Ltd. (SHF), South Africa’s biggest furniture chain, will raise about $1.7 billion in a share offering as it seeks to satisfy a local central bank requirement for a listing in Frankfurt.
The sale of about 150 million new shares to international investors and a rights issue for existing shareholders will raise about 17.8 billion rand ($1.7 billion) after transaction costs, the Johannesburg-based company said in a statement today. The new shares were sold at 52 rand each, a 12 percent discount to the 59.04 rand price at yesterday’s market close.
Steinhoff shares slumped 8.5 percent, the most since December 2008, to 54 rand in Johannesburg. The decline is “in line” with the probable equity dilution caused by the fundraising, Wayne McCurrie, a fund manager at Momentum Asset Management, said by phone. About 101 million shares traded, or more than 11 times the three-month daily average.
The retailer said last week it’s seeking a listing on the Frankfurt Stock Exchange to increase its exposure to investors in Europe, its biggest market. Steinhoff gets about half its revenue from continental Europe, where it owns French retailer Conforama. The South African Reserve Bank made the repatriation of proceeds to South Africa a condition when it approved the German listing, the company said.
The proceeds will be used “to strengthen the balance sheet and will give the company greater flexibility to continue the growth of its retail operations,” Steinhoff said.
The company said last week it will reduce its stake in KAP Industrial Holdings Ltd. (KAP) to about 45 percent from 62 percent through a sale of shares in the manufacturing unit. The action will also support the proposed Frankfurt listing and boost liquidity in the stock, the company said.
The demand to repatriate funds is “quite an unusual move by the Reserve Bank,” McCurrie said. “I think they saw it as an opportunity to help ease the current account deficit through capital flows.”
(Earlier versions of this story corrected the price of the new shares and removed references to a secondary listing.)