July 26th 2023

In a significant turning point for the embattled retail giant Steinhoff, the company’s shareholders have cast their votes in favor of dissolving the company and delisting it from the Johannesburg and Frankfurt stock exchanges. The decision was reached during an extraordinary general meeting held in Amsterdam, where around 99% of registered shareholders supported the proposal to delist.

The meeting, however, saw a low turnout, with empty chairs facing the four Steinhoff board members present. Few questions were raised before the vote, as the outcome was largely expected due to a prior certification by a Dutch court. This certification allowed Steinhoff to transition from a publicly listed company owned by shareholders to a delisted group under the control of its creditors.

The move to delist comes as a part of a debt restructuring plan, and in exchange for handing over economic control to its creditors, Steinhoff has been granted a three-year debt repayment holiday. This arrangement was seen as a necessary step to prevent the company from facing a chaotic liquidation resulting from its staggering €10.2 billion (R200 billion) debt burden.

Following the delisting, Steinhoff’s stock will be converted into contingent value rights (CVRs), a type of equity. The group’s creditors will receive 80% of these CVRs, while the remaining 20% will go to the shareholders. However, the exact value and trading mechanisms of the CVRs remain unclear at this point.

As part of the delisting process, a new holding company, yet to be named, will take over Steinhoff’s books, records, and other data. This entity will also maintain the register of CVRs.

The delisting marks the end of an era for Steinhoff, a company that was once valued at billions of rands and held a prominent position in fund managers’ portfolios. However, its fortunes dramatically changed in 2017 when it was embroiled in a massive accounting fraud scandal. The revelation of the fraud led to a sharp decline in the company’s share price and triggered lawsuits from shareholders who felt deceived into investing in the company.

Since then, under new management, Steinhoff has been striving to avoid bankruptcy. Last year, it reached a significant R24 billion settlement with creditors, but its debts still exceed its assets by €3.5 billion (R68 billion).

Commenting on the delisting, financial experts have expressed that Steinhoff’s decision was inevitable given the scale of its accounting irregularities and debt burden. The company’s market capitalization had dwindled to a mere R298 million, making it uncompetitive compared to other giants like Naspers and Prosus, which are worth trillions of rands.

Shareholders have been urged to carefully consider the future of other listed companies that are part of the Steinhoff group, such as Pepkor, Pep stores, and Ackermans.

The delisting of Steinhoff is indeed a sad chapter in South Africa’s business history, signifying the downfall of a once-prominent retail giant. Shareholders’ vigilance and active involvement in company matters have been emphasized as crucial to detect red flags and irregularities before they escalate into catastrophic situations.

In the aftermath of this delisting, the focus now shifts to the fate of the company’s creditors and shareholders and how they will navigate the uncertain path ahead. Steinhoff’s journey serves as a cautionary tale for the business world, emphasizing the importance of transparency, accountability, and prudent financial management to ensure sustainable growth and protect the interests of all stakeholders.

photo source: google

Delino Gayweh

Serrari Financial Analyst