Steinhoff lost about R200bn of its market value after the revelation of SA’s biggest corporate fraud in December 2017, when auditor Deloitte said it could not sign off the retailer’s accounts.
It has spent the past two years trying to settle litigation worth R184bn against it from shareholders who lost out when its share price collapsed in the wake of Deloitte’s decision.
The settlement could end an expected decade of lawsuits when it comes before an SA court on Thursday to decide if it is “just and equitable”.
What is at stake and why is it so urgent?
Steinhoff, which owns US retailer Mattress Firm, European retailer Pepco and SA’s Pepkor, has more than €10bn in debt, and says its survival is at stake.
Steinhoff wants the settlement to be heard by the Cape Town court urgently during the court’s holiday on September 30, when normal matters are not heard.
There is an element of urgency as the settlement process has timelines to which it needs to stick. Steinhoff has already negotiated repayment extensions with lenders, but it cannot honour and repay its €10bn debt pile until it has sorted out legal claims, while the permission it has from the Reserve Bank to export SA funds to foreign lenders and claimants also has an expiry date.
How long has it taken?
Steinhoff says the settlement took two years of legal negotiations and there were more than 18,180 initial claimants against it that had to be verified or rejected.
What has Steinhoff done to get it across the line?
It offered a settlement worth about R24bn in cash and Pepkor shares, which it increased twice to bring claimants on board.
In September, it went so far as launching an urgent Sunday court case to get its former largest shareholder, Christo Wiese, who lost billions when the share price collapsed, to vote in favour of the settlement when it appeared he wouldn’t. His settlement has since increased in value by R2.6bn.
It offered to pay €500,000 (R8.8m) in legal fees to an Irish company called Hamilton, which represents many SA pension funds, to secure their vote. It also increased the amount that pension funds and institutional investors would get by R3.2bn.
How much support does the settlement have?
Steinhoff says there is “overwhelming” support for the settlement, with all voters in SA in favour of it, as was the case with European claimants. The Public Investment Corporation (PIC), which manages government pension funds, also supports the settlement, which needs court approval in both SA and the Netherlands, where Steinhoff is registered. A Dutch court has already given its approval.
But three groups of people are opposing the approval of the settlement.
With so many votes in favour of the settlement, why is there a minority asking the court not to approve the claim?
Tekkie Town’s former owners, who sold their shoe retailer for R1.8bn in Steinhoff shares, oppose the settlement. They feel that Steinhoff should be liquidated and have a separate court case on this.
Lawyer Jan Lamprecht, who bought R6m in Steinhoff shares before the collapse, has a separate case against Deloitte, but has applied to join this case and is opposing the settlement.
Pieter Erasmus, once a close colleague of former Steinhoff chair Wiese and a CEO of Pepkor for 16 years, says he could get between 8% and 13% of what he is owed and the matter is too complex to be rushed in court.
Deloitte has applied to join the court process to support the settlement.
Why is Tekkie Town so willing to fight the battle to the end?
Businessmen Bernard Mostert and Braam van Huyssteen say they lost Tekkie Town in a fraudulent deal, maintaining there have been no repercussions for the fraud.
No arrests or prosecutions have taken place over the fraud, with a PwC report into what happened having been kept under wraps by Steinhoff. A liquidation would allow an independent investigation into the fraud.
Who wins?
At this point, the lawyers win. So many are involved and litigation could take years.
Steinhoff says the settlement is better than a drawn-out process: offering speed, certainty, lower legal fees and more money to claimants than if it is forced into bankruptcy.
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