Steinhoff Africa Shuns Toxic Parent to Revert to Pepkor Name
(Bloomberg) -- Steinhoff Africa Retail Ltd. is returning to its original name as the continent’s biggest clothing retailer puts more distance between itself and its scandal-hit parent.
The owner of clothing chains including Pep and Ackermans will revert to the name Pepkor Holdings Ltd. to separate itself from Steinhoff International Holdings NV, which in December reported accounting wrongdoing that wiped more than 95 percent off its market value. Steinhoff bought Pepkor for $5.7 billion in 2015 before spinning off most of it as STAR, as Steinhoff Africa is known, three years later.
“It’s the obvious route to go for us,” Chief Executive Officer Leon Lourens said by phone. “Most of the companies that are in STAR now are old Pepkor companies. The market knows the brand and the brand is associated with the values we’ve maintained over many years. The associations are better than it would be with Steinhoff.”
STAR also named former Pepkor CEO Pieter Erasmus as a non-executive director from Oct. 1 as it hunts for new recruits that have no connection with Steinhoff, which still owns a 71 percent stake.
Erasmus is “a great asset,” Lourens said. “He grew the business from a smallish company from about 2002 to what it was when we sold it to Steinhoff.” The company plans to add as many as three further non-executive directors, Lourens said.
Last week, Cape Town-based STAR said it had settled 16 billion rand ($1.3 billion) of debt owed to Steinhoff, removed its gross-guarantees and changed its external auditor from Deloitte LLP to PwC. Deloitte is Steinhoff’s auditor, and signed off on at least two years of financials that now need to be restated.
The shares fell as much as 11 percent after the company also said it has put aside 500 million rand that may be used to compensate Pepkor management, who have lost out due to the decline in Steinhoff stock. STAR retraced earlier losses to close 0.3 percent lower at 16.85 rand in Johannesburg on Tuesday, after the name change announcement.
“We believe we are now as clean as we can possibly get,” Lourens said.
With more than 5,100 stores, revenue gained 10 percent to 33 billion rand in the six months through March, the company said in an earlier statement on Tuesday. However, like-for-like sales at Pep Africa fell, and the company revised down its store-opening plan to 330 for the full year from 350.
“The retail environment is extremely tough at the moment,” Lourens said. “But our business is not broken. The brands are very healthy.”
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