Steinhoff International CEO Markus Jooste has resigned with immediate effect amid the retail giant’s admission of irregularities in its financial accounts that has sparked an investigation and a free fall in its shares.
Jooste, who has been with Steinhoff sine 1988 and has been crucial in turning the company into Europe’s second-largest homeware retailer, will be replaced by the 76-year old business baron Christo Wiese.
Steinhoff’s share price finished 61.42% lower to R17.61/share on Wednesday, wiping out R121 billion from its market capitalisation. Its share price in Frankfurt suffered a similar fate, crashing by 63.25% to €1.10.
Jooste’s resignation was announced by the Johannesburg and Frankfurt-listed Steinhoff after markets closed on Tuesday evening.
Jooste also resigned with immediate effect from the boards of Steinhoff Africa Retail (Star), which is Steinhoff’s unbundled African subsidiary in which it owns a 76.8% stake, PSG Group and PSG Financial Services, and Phumelela Gaming and Leisure.
Ben la Grange, the CEO of Star, also resigned with immediate effect, sending the company’s share price down by 22.76% on Wednesday, losing R19.3 billion in its market capitalisation. La Grange was Steinhoff International’s CFO before Star listed on the JSE in September.
Wiese, who is the present chairman of Steinhoff, will run the company on a temporary basis. Pieter Erasmus, the previous CEO of Pepkor Group, will join Wiese in an executive advisory capacity to assist with managing the group’s various retail interests globally.
“Wiese and the board will supplement the management team and will embark on a detailed review of all aspects of the company’s business with a view to maximising shareholder value,” Steinhoff said in a statement.
The retailer also announced that it has approached PwC to perform an independent investigation.
Steinhoff’s share price collapse intensified on Tuesday after releasing a trading update on Monday that its annual financial results for the year-ending September would be presented in an unaudited format.
The company was meant to release its annual results on Wednesday but will only release results “when it is in a position to do so.”
Steinhoff said that its auditors “had not yet finalised their review of certain matters and circumstances, most of which were raised by the criminal and tax investigation in Germany.”
It said new information has come to light relating to accounting irregularities, which might see the company having to restate previous financial statements.
Steinhoff’s share price has sunk by 72.35% so far this year.
Steinhoff has been forced to defend itself from damaging European media reports on numerous occasions about accounting irregularities and non-disclosures relating to its acquisitions, which has sullied its reputation.
Read: Steinhoff’s unravelling
In November, Steinhoff rejected media reports that revealed that the retail conglomerate did not inform investors about deals worth $1 billion (R14.2 billion at the time of writing).
A Reuters report said Steinhoff did not inform investors about material transactions with a related company despite European laws that require it to do so.
The transactions relate to Steinhoff’s purchase in 2015 of a 45% stake in Swiss company GT Branding Holding and loan to it of about 810 million Swiss francs (about R11.5 billion). The loans came shortly after Steinhoff bought the 45% stake in GT Branding Holding. In denying the allegation, Jooste said at the time: “all reporting requirements have been met. This has been confirmed by our internal legal team and external experts.”
Over the last two years, Steinhoff has transformed from being an Africa-focused retailer to a global retailer as it acquired global furniture and homeware businesses including Poundland in Britain, Mattress Firm in the United States and Conforama in France.
In August, a leading German business magazine alleged that a public prosecutor was investigating Jooste on suspicion of accounting fraud. In September, a Dutch court heard an application brought by for an investigation into Steinhoff’s 2016 annual accounts. The application, which was brought by businessman Andreas Siefert, alleged that Steinhoff did not properly account for the joint-venture nature of Conforama.
Steinhoff denied all allegations of wrongdoing.