South African Billionaire Sues Steinhoff for $4.8 Billion

(Bloomberg) -- Steinhoff International Holdings NV ex-Chairman Christo Wiese is suing the scandal-hit retailer for 59 billion rand ($4.8 billion) as the South African billionaire seeks to recoup investments he made in the company in 2015 and 2016.

The retail tycoon was the biggest shareholder in the owner of Conforama in France and Mattress Firm in the U.S. when the company reported a hole in the accounts in December. The stock has since crashed 95 percent, and Wiese’s wealth plunged from more than $5 billion to $2.1 billion, according to the Bloomberg Billionaires Index.

The lawsuit represents a major setback for Steinhoff as it battles to stay afloat and appease lenders. Executives told investors at the company’s annual general meeting in Amsterdam Friday that its financial situation is “very challenged” and that working capital had dried up. Debt of 10.4 billion euros ($12.7 billion) is the most urgent matter to be addressed, and the company is preparing to present a restructuring plan to lenders.

The shares fell 13 percent to 0.13 euros as of 3:47 p.m. in Frankfurt, where the South African company has its primary listing. Steinhoff didn’t immediately respond to a request for comment.

‘Excellent Businesses’

“It’s in the best interest of all stakeholders in Steinhoff that a restructuring of the group be effected on fair and equitable terms,” Wiese’s investment company, Titan Group, said in an emailed statement Thursday. Steinhoff owns some “excellent businesses” that “have every potential of continuing to create value for all shareholders and claimants.”

Wiese is making two legal claims, the first of which calls for the cancellation of an agreement whereby Titan took Steinhoff shares in exchange for his clothing retailer Pepkor Ltd. in a $5.7 billion deal three years ago. That combination kick-started Steinhoff’s breakneck expansion in Europe, the U.S. and Australia led by former Chief Executive Officer Markus Jooste, who quit when the financial irregularities were uncovered in December.

The second legal claim relates to a further investment made by Wiese in 2016, which was to enable Steinhoff to meet its debt obligations at the time of its acquisition of U.S. bedding chain Mattress Firm.

Wiese described news of the accounting irregularities as a “bolt from the blue” at a hearing with South African lawmakers in January. He briefly took an executive role to try to steady the company after Jooste quit, but resigned days later after other investors complained of a conflict of interest.

Steinhoff is registered in the Netherlands and South Africa.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Eric Pfanner at epfanner1@bloomberg.net, John Bowker

©2018 Bloomberg L.P.