Billionaire Wiese's Hold on Steinhoff Weakens Amid Scandal

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(Bloomberg) -- Christo Wiese’s grip on his global furniture retailing empire is slipping after the South African billionaire resigned from the board of troubled Steinhoff International Holdings NV and creditors forced a sale of part of his stake.

Wiese stepped down from his role as chairman to resolve questions over any conflict of interest as the owner of Mattress Firm in the U.S. and Conforama in France fights for survival amid a deepening accounting scandal.

The resignation came after Steinhoff said its accounting errors stretch back into 2016, highlighting the extent of possible wrongdoing at the retailer, which has led to a more than 80 percent stock slump since the beginning of last week. The company is due to meet with banks next week to try to navigate a way out of its crisis, which has wiped more than 10 billion euros ($11.8 billion) off its value.

In one of several moves to set up a financial lifeline, Steinhoff Africa Retail Ltd., a subsidiary, said Friday that it’s refinancing loans with its parent company that amounted to about 16 billion rand ($1.2 billion).

Steinhoff International is also raising cash by selling assets. It sold 20.6 million shares of investment holding company PSG Group Ltd. on Friday, raising about $345 million. The sale reduced Steinhoff’s stake in PSG to 16 percent from 25.5 percent.

Steinhoff shares fell 9.4 percent at 3:25 p.m. in Frankfurt, where the Dutch-registered and South Africa-based company has its primary listing, as investors expressed frustration with the company’s limited disclosure since the crisis erupted.

“There are so many mysterious deals, treaties and pacts that we don’t know,” said David Shapiro, deputy chairman of Sasfin Wealth. “We’re sitting in the dark waiting for any kind of news.”

Security Rights

Banks that provided funding to an entity controlled by Wiese have sold 98.4 million Steinhoff shares, exercising their security rights over stock held as collateral, the company said late Thursday. The sale reduces Wiese’s stake to 25 percent from 27 percent, according to data compiled by Bloomberg, potentially weakening the company’s defenses against any takeover.

Wiese held the shares as part of a voting pool that exercised control over Steinhoff, under a structure that stemmed from the retailer’s acquisition of the billionaire’s Pepkor clothing chain in 2014. It included a number of shareholders that voted together on company decisions. The share sale forced by the banks means the group has lost control, money manager Wayne McCurrie at Ashburton Investments Management Co. in Johannesburg said in a phone interview.

“Now that Christo sold those shares, the block fell under 30 percent, and the voting block will not be jointly voting anymore, which essentially means they have lost control,” he said. “They are open for a takeover now.”

The moves come as law firms backed by deep-pocketed funders like Paul Singer’s Elliott Management Corp. are trying to get shareholders to join class-action lawsuits against Steinhoff, promising not to charge fees unless the case is successful.

At stake is the future of a retailer with 130,000 employees and international brands that also include U.K. discounter Poundland. Wiese, 76, had stepped in to lead the company on an interim basis last week after Markus Jooste quit as chief executive officer as Steinhoff postponed publishing its financial results. Auditor PwC was appointed to probe accounting irregularities.

Heather Sonn, a member of the board’s independent subcommittee, will take the role of acting chairman, the company said in a filing late Thursday. Wiese’s son Jacob also resigned from the board, Steinhoff said. The departures are the company’s latest efforts to restore order as it works with Moelis & Co. to try to appease lenders and with AlixPartners LLP to advise on “liquidity management and operational measures.”

Plunging Value

Christo Wiese has seen his net worth plunge by more than $2 billion since the scandal deepened last week, marking an abrupt reversal to one of South Africa’s most ambitious global business forays.

The elder Wiese built up clothing seller Pepkor in South Africa over several decades, expanding it into Africa’s biggest retailer. In 2014 he sold it to Steinhoff, a furniture chain run by Jooste. The combined companies then accelerated their international expansion with acquisitions in Europe and the U.S.

Now the company has put 1 billion euros of assets up for sale, and it has said it’s examining the “validity and recoverability” of another 6 billion euros worth of holdings.

©2017 Bloomberg L.P.

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