/ 13 March 2018

Steinhoff to sell part of stake in KAP to help settle debt

Marius Jooste of Steinhoff during the Springbok Sevens Steinhoff Sponsorship Launch at Markotter Indoor Facility.
Marius Jooste of Steinhoff during the Springbok Sevens Steinhoff Sponsorship Launch at Markotter Indoor Facility.

Steinhoff announced in a statement to shareholders on Tuesday that it has decided to sell part of its stake in KAP Industrial Holdings.

The Stellenbosch-headquartered retailer said it was launching an accelerated book-build of up to 450-million ordinary shares in KAP. If successfully completed, this would decrease Steinhoff’s holdings in KAP from 43% to 26%.

READ MORE: Holes in Steinhoff’s management led to its corporate scandal

The sale is subject to acceptable pricing being achieved, and certain additional conditions.

Through an indirect wholly owned subsidiary, Steinhoff currently owns 43% of KAP.

According to Steinhoff this shareholding has created material value to Steinhoff shareholders since 2012 due to KAP’s growth. And while the global furniture conglomerate said it continues to view KAP as a “compelling investment case”, it was looking to sell the shares in order to settle certain debt obligations.

On successful conclusion of the placing, Steinhoff said it would retain ownership of approximately 26% of KAP’s issued share capital, which it views as a strategic investment.

The placing shares will be offered to qualifying institutional investors only. Steinhoff said the placing does not constitute an offer to the public to purchase any shares.The placing will be carried out by Standard Bank and Investec Bank.

READ MORE: Focus shifts to Steinhoff’s ex-chair Christo Wiese

“The book will open with immediate effect and is expected to close as soon as possible. Steinhoff reserves the right to close the book at any time. Pricing and allocations will be announced as soon as practicable following the closing of the book,” said Steinhoff.In line with Steinhoff’s intention to retain the remaining interest in KAP Industrial, Steinhoff has agreed to a 90-day lock-up period, subject to customary carve outs.

Steinhoff shares were trading up 2.05% on the day at R4.49 a share at 10:45. Shares in KAP, meanwhile, were down 2.94% at R8.25.

A question of debt

At the end of February Steinhoff said in a quarterly market update, that it was continuing to take steps to refinance or redeem debt within its South African operations.

The conglomerate has been facing liquidity issues since early December, when its former CEO Markus Jooste abruptly stepped down after the group’s auditors flagged financial irregularities in its financials.

These irregularities at the subject of an on-going forensic prove by PwC.

READ MORE: Silence shrouds Steinhoff saga

In early February Steinhoff’s senior management, including former chair Christo Wiese, briefed Parliament on the financial irregularities that caused the conglomerate’s share price to fall by over 80% since December 5 2017, erasing roughly R200-billion in shareholder value.

Wiese told the Parliament committee that the problems at Steinhoff came like a “bolt out of the blue” to him. – Fin24