KAP Industrial Holdings Ltd, a South African company 43% owned by Steinhoff International Holdings NV, is distancing itself from the scandal-hit retailer by scrapping two business deals with the group.
An agreement to share corporate-services including legal and investor relations ends on March 1 and an arrangement to co-rent office space will run until March 31, Stellenbosch-based KAP said in a results presentation on Tuesday. KAP has no outstanding loans either to or from Steinhoff and is independently managed, controlled and funded, the company said.
“We stand by that,” said chief executive officer Gary Chaplin, a former Steinhoff employee.
KAP, a supplier of industrial products such as timber, chemicals and car parts, is seeking to avoid contagion from the crisis surrounding Steinhoff, which has plunged almost 90% in value since announcing accounting irregularities in early December. KAP’s shares slumped 6.8% on the first trading day after the wrongdoing was uncovered, although they have since recovered and closed 3.6% higher by the close in Johannesburg on Tuesday.
“It’s been a sad process to watch,” Chaplin said, referring to Steinhoff’s battle with survival. “It’s been a tricky period.”
Steinhoff has been looking for ways to raise cash from the sale of non-core assets as it battles to shore up liquidity. While the owner of Conforama in France and Mattress Firm in the US has generated a combined $931 million from the sale of two blocks of shares in South African investment holding company PSG Group Ltd, it hasn’t — as yet — disposed of any of its stake in KAP, which is worth about R10.75 billion.
KAP has been hiring Steinhoff staff to work in its new separate corporate services unit, Chaplin said. The company will rent different office space in Stellenbosh, a wineland town about 45 minutes drive from Cape Town where Steinhoff has its South African headquarters.
The company said Monday that a series of acquisitions and expansion projects would fuel growth in 2018 after net income increased by 14% in the six months through December. Steinhoff has been a shareholder in KAP since it agreed to buy a 21% stake in what was then called Kap International in 2005.
Steinhoff shares rose 1.1% to R5.46 as of 9:09 am in Johannesburg Wednesday. KAP rose 1.7%.
© 2018 Bloomberg L.P