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Steinhoff Boosts Fund-Raising to $1.4 Billion in KAP Sale

Updated on
  • Embattled retailer is reducing KAP stake to refinance debt
  • Owner of Conforama, Pep is embroiled in accounting scandal

The headquarters of Steinhoff International Holdings NV stand in Stellenbosch.

Photographer: Waldo Swiegers/Bloomberg

Steinhoff International Holdings NV boosted the amount raised from asset sales to about $1.4 billion as the embattled global retailer strives to shore up its balance sheet.

The owner of Conforama in France and Mattress Firm in the U.S. sold almost 3.7 billion-rand ($313 million) of shares in South Africa’s KAP Industrial Holdings Ltd., adding to disposals including stock in investment holdings company PSG Group Ltd. and a private jet. Steinhoff said Dec. 5 it had uncovered accounting irregularities and that Chief Executive Officer Markus Jooste quit, leading to a 90 percent plunge in the share price and emergency talks with lenders.

“This looks well managed and KAP will be very happy to see Steinhoff selling in an orderly way that improves KAP’s spread,” Mark Hodgson, a Cape Town-based analyst at Avior Capital Markets, said by phone. “It’s better sooner than later for Steinhoff.”

The fund-raising initiatives are enabling Steinhoff to buy time from creditors as the Frankfurt-listed company struggles to boost its finances in the wake of the stock-price crash. The retailer, which also owns Africa’s largest clothing chain Pep, said earlier this month that its near-term liquidity needs have been met and that the company is in the process of redeeming a domestic medium-term note program.

Read More: South Africa’s Steinhoff Claws Back From Cliff’s Edge

The shares fell 0.9 percent as of 3:37 p.m. in Germany on Tuesday. KAP, in which Steinhoff has been a shareholder since 2005, rose 0.5 percent to 8.54 rand by the close in Johannesburg, valuing the company at 24.6 billion rand.

Steinhoff will use the proceeds of the KAP sale to refinance or redeem South African debt, one of the plans the company is pursuing to strengthen its finances. The shares were offered at a reference price of 8.50 rand each, the closing level on Monday, and were placed at 8.15 rand, Steinhoff said in a statement after the offer closed. The book was multiple times oversubscribed.

The company has appointed PwC to investigate its finances ahead of restating accounts dating back to 2015, and has referred Jooste to South Africa’s anti-graft watchdog. The auditors are focused on certain off-balance-sheet structures and deals with related parties and is likely to find that some assets, revenue and profit figures have been overstated, Steinhoff said on March 1.

The sale of shares in PSG raised $931 million over two rounds., while the disposal of a 17 percent stake in French online retailer Showroomprive and a flagship store in Vienna generated a combined 139 million euros ($171 million).

Read More: Steinhoff Finds $1.1 Billion Under the Mattress. Is It Enough?

KAP, a Stellenbosch-based supplier of industrial products such as timber and chemicals, said last month it’s scrapping two business deals with Steinhoff to distance itself from the company. An agreement to share corporate-services including legal and investor relations ended on March 1 and an arrangement to co-rent office space will run until the end of the month.

Steinhoff’s stake in KAP fell to 26 percent from 43 percent as a result of the placement.

“Steinhoff continues to view KAP as a compelling investment case, especially in view of recent events in South Africa and the prospect of improving economic conditions,” said the company, referring to the replacement of former President Jacob Zuma with Cyril Ramaphosa.

— With assistance by Renee Bonorchis, and Loni Prinsloo

(Updates with total raised from KAP sale in second paragraph.)
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