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Tekkie Town files for reversal of Steinhoff acquisition

Previous owners of speciality retail chain want out.

Tekkie Town filed papers in the Western Cape High Court late on Thursday afternoon to have its R3.2 billion 2016 acquisition by Steinhoff cancelled.

Steinhoff acknowledged this via Sens on Thursday, saying that it had received “demands” from the Tekkie Town vendors of some 120 million (R1.75 billion).

Warren Erfmann, previously a non-executive director of Tekkie Town, said the founders and shareholders of Tekkie Town that sold to Steinhoff in 2016 want the transaction cancelled on the basis that what Steinhoff was representing at that time was false. “It’s fairly straightforward,” says Erfmann. “We believe we were misled by Steinhoff as the withdrawal of its financial statements have indicated, and we want the court to cancel the transaction and return the business to its original owners.”

In unwinding the transaction, complexity may arise from the fact that Steinhoff vended Tekkie Town into Steinhoff Africa Retail (Star) last year, which listed separately on the JSE.

Steinhoff purchased the entire shareholding of Tekkie Town for a consideration of R3.2 billion. Steinhoff used its own shares as consideration for 58% of the transaction. The majority of the 58% belonged to AJVH Holdings, an entity controlled by Braam van Huyssteen, the founder of Tekkie Town, and Bernard Mostert, the CEO of both Tekkie Town and Star’s Speciality Fashion and Footwear division. The balance of Tekkie Town was owned by private equity firm Actis, which sold for cash.

When contacted for his response, Van Huyssteen, who is still the chairman of the Speciality Fashion and Footwear business under Star, confirmed that he wanted to unwind the transaction. “We started this business in Mossel Bay in 1989 and brick-by-brick we built it up over the last few decades. People entrusted us to look after the business – our employees and our shareholders – and we were confident at the time that we did the Steinhoff deal that it would be the right home for us. But the last few months have proven this to be otherwise.”

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Let me get this straight, they sold, and are now owed some monies, why ask for the entire business back, rather than demand whatever amount is outstanding? IF, any.

I don’t see Steinhoff doing that, I see it defending itself vigorously and ultimately winning this. I am sure that, despite this stupendous ‘dubious’ accounting practices, they have it laid out clearly on the transaction documents, when what is supposed to be paid to who. So, far I don’t hear anyone saying that they have not been paid. As for Actis, am not sure that if they were paid out in cash, that they have legal standing to say, they were duped. They asked for a price and received it…even if it was inflated. So, far from what I have seen and heard, Steinhoff has not put Tekkie Town up for auction or for sale. As a shareholder, I don’t see why the should even contemplate such a nonsensical request. Chancers!!!

There are bad parents and they may well have done something in contravention of the sale agreement.

Desguised inside trade done by Wiese (the ex-chairman) and the other board members by taking lots of risky high loans against their Steinhoff shares, because it would be easily picked up as a criminal inside trade to sell before the crisis hit, and so they waited until the bad news went out in December, and then the banks started to sell the shares on their behalf to recover the loans, and so the ex-chairman and board members can just say that they’ve never knew what’s happening and that their Steinhoff shares were sold (definitely at a relatively good price), were not sold by them (to avoid being branded as obvious inside trade) but were sold as forced sale by the banks to cover the loans, and so they get out with a good amount of money, and accusations of inside trades can then be defended as forced sale.
Wiese (the ex-chairman) and the other board members knew of the accounting rot about 3 months before it was announced (maybe more), yet they didn’t announce it at the time, and some of them went and took eve more loans against their Steinhoff shares so to have more of their shares sold quicker and at higher price.

Thing is the founders were paid in shares which are now worth less than nothing, clearly that’s a loss on their side. In conclusion of thse contract, the shareholders obviously did consider the value of those share.

So what they are saying in my understanding is that, those shares were clearly mistated, and that is the reason the AFS had to be withdrawn.

@BageSuge,
You are effectively saying if I bought your house using cheque that later bounced you’d accept that the transaction is still valid. I doubt that’s what you’d do.
On the basis of logic alone, I am not a lawyer, I believe Tekkie Town is right to want the transaction reversed. Steinhoff partly paid for the transaction using its own shares that were fraudulently inflated by Steinhoff itself. The Inflated shares are effectively a bounced cheque.

Not if you could sell those shares in the open market anytime in 2017. The shares were as good as cash unless there were selling restrictions

When they sold off their business, like every business deal, there is an assosiated risk and benefits. The assumed benefit was that they got a very high premium for their business at the time of the deal. The associated risk is that the business went bad and they have to live with that outcome. I buy shares on the stock market in a company i think will do very well based on their financial reports whether it was fudged or not, if that business collapse I stand to loose and there is no way I can demand my money back.

If what you are saying is true that the directors need to demand their money back, than it is true that all of Steinhoff shareholders need to demand the same.

Tough luck buddy.

They should’ve demanded cash on delivery for their shares…

TekkieTown wants to get as far away from Steinhoff and it’s cooked books as possible! And it’s tainted future. Makes PERFECT sense!

Whether Steinhoff defends or not is not known.

But, as I understand the law – if there is fraud – and I see no reason why this would not be proven, the transactions can be reversed – in toto.

Question is – to what lenghts will TT go to prove fraud and to what length would Steinhoff try and abvoid this argument in the open.

A deal will be done – and as ususal Bully Wiese is involved.

It does not matter if Steinhoff defends or not because there is no money. The best that they can hope for is for the transaction to be set aside on some spurious grounds and the parties go back to were they where before the deal took place and this will mean that STAR will unravel.

Now if rumours are true that there was a restraint on the sellers selling the shares for a period of four years, then the sellers have a good case.

Why don’t you find out what you are talking about before you write for ever talking rubbish.
Actis got cash.
Mr Van got nothing-shares that he could’t sell for four years!
You work for all your life and get nothing for 65% of your business and you have to listen to a mug like you- who knows nothing,.

No certainty the outstanding money will be paid! There’s a restructuring – anyone owed money could get 50c in the rand, or be forced to wait much longer than envisaged to unlock value – hell no, TekkieTown is doing precisely the right thing! It’s tantamount to stating a claim LOUD and CLEAR!

The problem is that even 1c in the Rand is in doubt …

SCREW-UPS of Comedies!!! !!
watch for the winners of these cases!!! AND those will be the legal teams AND more monies down the big black holes!!

Brains at work on feet level. They win will open new roads for sellers of any thing if happiness change in despair. Think about the car and home marked. The old lady owner and inflation will lose all standing.

Guessing you used some form of predictive text to string together that garbage, eh?

hahaha, thought it was just me not having had my morning coffee.

Whether it is Dr Wiese or the Tekkie Town founders, those who institute claims do so on the basis of incorrect annual financial statements. That means all fingers point in one direction i.e. the auditors who prepared the AFS and that was Deloitte. The problem is all the Big 4 Audit firms make clients signs a “limitation of liability” which means effectively they can at most be sued for twice their fees. So if the audit cost R10m the most they can get is R20m which is a pittance. The problem is ALL the Big 4 firms do this. If ever the Competition Commission needed to break up an unholy collusion, it is with this nonsense.

Surely you don’t believe it is Deloitte who “prepare the AFS”? They audit them, it is the duty of the directors to prepare the AFS. There is a hole in the accounts going back a few years. MJ has acknowledged his hand therein.
But other directors knew nothing? nor did the CFO? I am absolutely stunned that la Grange is somehow not involved in this mess. It is impossible he had no knowledge and must have been very close (if not instrumental) in these crazy acquisitions.

Then Deloitte should have qualified the AFS. They were paid well for their work.

Heard an ex employee of a company where Le Grange was a CEO tell one or two quite interesting things yesterday….staff was retrenched and it’s only in Dec that they realised why ….

Rietrot, you got it wrong mate. Auditors don’t prepare the AFS, they report on them and if they find nothing untoward, they issue an unqualified report.

The Annual Financial Statements are the responsibility of the directorate and they falsified them … for how long we don’t know, but probably started as far back as 2012.

Hang on. Were they not allowed to sell the shares that were used as payment? If they were, well then they had the whole of 2017 to exchange their shares for cash in the open market.

I mean, when I bought some SH shares last year I was also working on certain assumptions. Can I now take SH to court and say the company must buy back my shares at the price I paid for them?

This court application would only make sense to me if the Tekkie Town owners were in some way restricted from selling their SH shares.

Like all vendors they were paid with an inflated number of shares (based on a high earnings multiple)to the detriment of ordinary share holders.Bad luck buddy, your greed got the better of you.

Not an inflated NUMBER of shares; it’s the right number of shares of which the VALUES had been inflated

They weren’t allowed to sell their shares-they still have them. As someone said, they were paid with a cheque that bounced.

I am not in the legal profession but can anyone tell me what the chances of success of such a case based on previous litigation/s. In my opinion there is very little chance of success which I am sure if they would have been told if they had credible legal advise.

Another concern is that with the all the big dogs (wiese, tekkie town and GT Ferreira) lining up at the trough how much will be left for minority shareholders ?? maybe someone or the author can give us some insight into this.

When you buy or take shares as payment, you can not afterwards go back and say you did not know what you bought. Who will pay you?

No one is saying they didn’t know what they bought. They’re saying they were being lied to – there’s a difference

Surely Tekkie Town would have done a due diligence of the purchasers if they were getting paid part cash / part script. The thing that surprises me the most was that someone actually paid R3.2 billion for this business……

But then Steinhoff over-paid for all the businesses it bought and the greedy vendors were willing to accept these over payments, mostly in shares.

Gosh, it sounds as though it was a perfectly sound and solid business – how would a due diligence reveal accounting fraud!

A due diligence of Steinhoff would have revealed little with the information publicly available. There was no way at the time of this take over that the sellers would have been able to uncover any malfeasance.

Steinhoff only paid (42% of R3.2 billion) R1.34 billion of the purchase price with the rest in cash. So the sellers have a good case but it remains to be seen whether Steinhoff can cough up the money – I seriously doubt it.

Desguised inside trades done by Wiese (the ex-chairman) and the other board members by taking lots of risky high loans against their Steinhoff shares, because otherwise it would be easily picked up as a criminal inside trade to sell before the crisis hit, and so they waited until the bad news went out in December, and then the banks started to sell the shares on their behalf to recover the loans, and so the ex-chairman and board members can just say that they’ve never knew what’s happening and that their Steinhoff shares that were sold (definitely at relatively good prices) were not sold by them (to avoid being branded as obvious inside trades) but were sold as forced sale by the banks to cover the loans, and so they get out with a good amount of money, and accusations of inside trades can then be defended as forced sale.
Wiese (the ex-chairman) and the other board members knew of the accounting rot about 3 months before it was announced (maybe even before), yet they didn’t announce it at the time, and some of them went and took even more loans against their Steinhoff shares so to have more of their shares sold quicker and at relatively higher prices.

There is a much simpler and cheaper way to protect he the value of their investments. If they expected the share-price to crash, they did not have to borrow to buy shares so that the bank could be a “forced seller”. They could simply buy put options with an “at the money” strike price. They could even get this protection for free, by doing a “zero cost collar” structure. This is perfectly legal, cheap and most efficient.

They did not try to sell their shares because they had inside information. They simply tried to support the share-price. They used the bank’s money to support the value of their own portfolio. Just like with Pinnacle Point Holdings, this strategy backfired big time.

The largest owners of Steinhoff have been using inflated financial statements with great success for more than 30 years. This giant, overstated asset/profit bubble burst when when a German investigator punctured it with a comment.

As an ordinary shareholder can I also ask my R10000 back? when I bought R90 per share it was based on false finnancial statementts

Join a class action against Steinhoff – there ARE legal firms currently representing small shareholders
I think these firms are German but Google it and read backdated moneyweb articles to find the name (s) of the firm (s)

Guys, I hate to burst your bubble but there is zero equity left in Steinhoff. If you want to claim something, it has to be from the guys who are sitting with the equity that evaporated from Steinhoff. The short-sellers who published the Viceroy report are the only winners in this game, and there is no chance for a successful claim against them. All the equity was transferred to Viceroy.

The cover pages of the annual financial statement are all that remains of Steinhoff. The contents was an illusion. The profits and assets simply disappeared as the German investigators paged through the financial statements. Yes, there are still viable businesses that operate under the Steinhoff name, but the claims against the company will destroy any equity that remains. The current share-price is an optimistic valuation of the company. The advice of Warren Buffet, to buy when others are selling, is the only reason why investors buy the shares. Even Bitcoin has more intrinsic value.

The share-price will go to zero and Steinhoff will be delisted, just like Enron.

@sensei.

Short it then? If it truly is going to zero. A share price also never goes to zero, it gets suspended before that. Day pne stuff.

The profits also don’t go to viceroy man, they’re a small piece of the puzzle.

Banks will restructure. Delisting this group will not help anyone. Not even the banks.

Chat in a few months

I empathize with all who lost their money ,based on false financials and promises.
I’m wondering I-If The owners of TT can claim back their business,do those who sold for cash
,ie Actis who took the cash 1;3 billion rand for their 42% shareholding.
Do they Actis now have to return that money to Steinhoff ,because they received ‘ false cash holdings’

The best solution would be for the deal to be undone and all parties revert to where they were before the transaction but I very much doubt it.

I’ve worked for Tekkie Town for over 6 years.
It’s a great place
Mr Vanhuyssteen should never have given TT to these mongrills!

How was TT valued at over R11 million per store?

If you consider that cash portion it is only R4.6 million per store. Consider how much it costs to open a franchise today consider! Steinhoff probably never intended to pay more than the cash portion. The issue of shares to pay the balance simply diluted SNH’s equity.

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