The former owners of discount retail footwear and apparel company Tekkie Town, which was acquired by Steinhoff in 2016, launched an application in the Western Cape High Court on Wednesday to liquidate the global furniture company.
Steinhoff is in the middle of cleaning up its image and balance sheet after revelations of a R100bn-plus accounting fraud in 2017, which sent its share price crashing and triggered multiple litigation claims from shareholders and former business partners on grounds that it misrepresented its financial position over a number of years.
The court application comes while Steinhoff is trying to persuade former business partners and shareholders to accept the proposed $1bn (about R14bn) settlement. This takes the form of cash and shares from its SA subsidiary Pepkor in exchange for dropping multiple claims of more than R130bn on the grounds that they were duped into buying worthless stock through misleading and false information about the health of the company.
Braam van Huyssteen, founder of Tekkie Town, and former CEO Bernard Mostert and other entities representing former executives and shareholders of the business are bringing the application as "contingent or prospective creditors" of the company and on the grounds that Steinhoff is "unable to pay its debts [and] its liabilities exceed its assets by such a margin that it has lost more than 75% of its share capital".
Steinhoff, which lists its registered office in Stellenbosch, declined to comment until its attorneys completed reviewing the application.
Attorney Paul Katzeff, chair of C&A Friedlander, who is representing the former Tekkie Town owners, says the application calls into question the bona fides of Steinhoff’s proposed global settlement of many claims, including one from former chair and shareholder Christo Wiese.
"The proposed settlement favours some creditors over others. If it goes ahead as planned, Tekkie Town’s former owners will not be able to pursue their claim for restitution of their business.
"Instead, they will be paid out a minuscule fraction of the value they put into the company.
"So we want Steinhoff liquidated so that all creditors can be treated equally and, critically, that the lid can be fully lifted on SA’s largest ever corporate fraud and justice served."
Tekkie Town was acquired by Steinhoff in August 2016. Van Huyssteen and company agreed to relinquish their 59% stake in Tekkie Town in exchange for shares worth R1.85bn in the retailer. They were then precluded from selling the shares for three years.
After acquiring Tekkie Town, Steinhoff transferred the business to its local listed subsidiary, Steinhoff Africa Retail, as Pepkor was then known.
But after reports of accounting fraud at the retailer and the departure of Markus Jooste in December 2017, Steinhoff’s share price plunged 95%, rendering the shares virtually worthless. This led to an acrimonious public breakdown in the relationship of Van Huyssteen and Mostert with Pepkor and Steinhoff.
The former Tekkie Town shareholders launched litigation in May 2018 to have the business returned to them.
Alternatively, they wanted to be compensated in cash for the sale of the business.
Steinhoff and Pepkor opposed the claim. In January, judge Lee Bozalek ordered the Tekkie Town former owners to substantially amend their particulars of claim within 20 days. This was done, but Steinhoff and Pepkor lodged an objection to the amendment.
According to discussions with attorneys who specialise in liquidations, May 12 — the date when the application was launched in court — will be deemed the effective date of liquidation if Van Huyssteen and company are successful.
This means any transactions entered into after Wednesday that involve selling or distributing assets (such as the planned listing of Pepco) will be scrutinised to ensure they are done on sound commercial terms. Should transactions not meet this test, they can be reversed or voided. The matter is to be heard on May 24.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.