Steinhoff Falls as Accounting Probed by German Prosecutors

  • Investigation centers on asset transfers within retailer
  • Shares decline as much as 11% ahead of Frankfurt listing

Steinhoff International Holdings Ltd., the South African furniture chain that plans to start trading on the Frankfurt Stock Exchange on Monday, is being investigated by German prosecutors for possible accounting violations.

Authorities searched Steinhoff offices in the town of Westerstede on Nov. 26, the company said in a statement Friday. They also visited some private homes as prosecutors in Oldenburg investigate four current and former managers, Frauke Wilken, a spokeswoman for the prosecutors, said by phone, without naming the people. The stock fell the most in almost 18 months.

Steinhoff “is fully committed to support the authorities, and has begun to take immediate steps, in clarifying and resolving these matters,” the Johannesburg-based company said in a statement. The shares will start trading in Frankfurt Dec. 7, Steinhoff said.

The investigation complicates Steinhoff’s German listing, designed to attract investors in Europe. Steinhoff, which owns the French retailer Conforama and has operations in the U.K. and Germany, said the authorities are reviewing the balance sheet treatment of transactions between Steinhoff units and third parties. Management is of the view that taxation matters have been properly reflected in its accounts, the company said.

Accounting Suspicions

“There are suspicions that sales were overstated in the balance sheets of two companies of the group," the Oldenburg prosecutors said in an e-mailed statement. Some units may have booked income through sales of assets to other companies which in reality were part of the group, they said.

Steinhoff is seeking to become one of the world’s biggest discount retailers following the purchase of Pepkor Holdings Pty Ltd. last year.

The shares fell 7.2 percent to 77 rand at the close in Johannesburg, the most since July 3, 2014. That pared gains for the year to 30 percent, valuing the company at 282 billion rand ($20 billion).

“The uncertainty will likely put a damper on Monday’s FSE trading,” Alec Abraham, an equities analyst at Sasfin Securities in Johannesburg, said by phone. “Longer term, Steinhoff’s share may still rise, based on its valuation versus its German peers.”

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