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Steinhoff duo’s firms made millions dealing in cheap JD stock

The businesses made a profit of R901 million selling JD Group stock 14 years ago after buying in at a discount that wasn’t shared with other investors.

Just a few years after being named head of the retailer that became Steinhoff International Holdings NV, Markus Jooste was involved in a series of complex trades in a smaller South African competitor that yielded a multimillion-dollar payday for companies linked to him and board member Claas Daun.

The businesses made a profit of R901 million selling JD Group stock 14 years ago after buying in at a discount that wasn’t shared with other investors, according to company documents and court and regulatory filings. While Johannesburg Stock Exchange listing requirements dictated that all pricing information on transactions of that size had to be disclosed, JD Group’s then chief executive, David Sussman, says he’s sure all regulations were followed.

The deals happened at around the same time that companies linked to Jooste sold car-dealership properties and forestry plantations to Steinhoff for far more than market prices. Jooste quit on December 5, 2017, the same day the company reported accounting irregularities that have since wiped 94% off the retailer’s value, and the company has asked the police to investigate him. Daun left the board in February.

Steinhoff, which now owns JD Group, has commissioned PwC to probe its finances. It says restatements may have to go back at least as far as 2015. Steinhoff said it won’t comment on past transactions and relationships until the probe is complete. The JD Group trades, which date back more than a decade, don’t appear to have affected Steinhoff shareholders.

Jooste, who was appointed group managing director in 2000, set up agreements with Daun from 2002 that would result in JD Group’s takeover of Steinhoff’s money-losing rival Profurn Ltd. and the acquisition of JD Group shares at the discount, according to the documents.

Jooste’s lawyer Callie Albertyn didn’t respond to emails and messages left at his office. Daun didn’t respond to queries.

The dealing began in 2002, when FirstRand executive Theunis Lategan asked Daun, once a director of Profurn, to help rescue the struggling retailer. The following year, JD Group took over Profurn.

Following a 2002 rights offer by Profurn, underwritten by FirstRand, and its subsequent takeover by JD Group, FirstRand held 25% of JD Group’s shares with a cost basis of R14.17 a share — compared with the R19.06 they averaged in 2002, according to data compiled by Bloomberg.

Companies linked to Jooste and Daun bought the bulk of that stock from FirstRand at the discounted price of 14.17 and sold the shares for three times as much. Lategan referred queries to FirstRand.

“The discount is extraordinary,” Magda Wierzycka, CEO of Cape Town-based Sygnia Asset Management, said in an emailed response to questions.

It was a 17% discount to the shares’ closing price on that day in June 2002 and a 64% discount to JD Group’s price the day the transfer to an investment vehicle called Capstone 556. and Daun & Cie was completed, according to Bloomberg calculations. Capstone had Lategan on its board and its funding was overseen by Jooste.

FirstRand said it wasn’t under any obligation to disclose the price and that it had acted to save Profurn from collapse. The bank said it wasn’t involved in the later sale of JD Group shares by Jooste and Daun.

Capstone and Daun & Cie each sold 14 million JD Group shares at R42.50 a piece, generating a profit of R396.6 million for each company. Capstone then sold its remaining 3.5 million JD Group shares to Mayfair Speculators , where Jooste was the sole director, for R45 a share.

Profit made

Capstone’s two sets of share sales led to a R504.5 million profit and when added to Daun & Cie’s takings, the total profit for the companies linked to Daun and Jooste was R901 million.

As with the entities involved in the car dealership properties and the forestry assets, Capstone was held through complicated structures that linked back to Fihag Finance Handels AG, the Swiss-based company that was initially controlled by Steinhoff founder Bruno Steinhoff, according to company filings. Fihag was also a major shareholder in Steinhoff International. While JD Group was taken over by Steinhoff in 2015, Capstone still exists and Stefan Potgieter, Jooste’s son-in-law, is now its only director, company filings show.

Fihag didn’t respond to requests for comment while Potgieter said he wasn’t party to the transactions.

© 2018 Bloomberg L.P

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What’s new !!!

Just shows Jooste is just a common thief, most probably his entire life.

The entire Steinhoff existence from the time Jooste become “the boss” was structured to be a Ponzi Scheme with benefits for his “inner circle” cronies.

Jooste did not act ALONE…. obviously from this article alone, Bruno Steinhoff must have known.

The Mattress Firm and Tekkie Town deals are no different. The “purchase price” of those deals just do no make any logical sense.

The Tekkie Town deal apparently did not include any fixed assets. How does one get to 3.2 billion plus a supposed 3 year “guaranteed profit” (another approx. 1 billion) = TOTAL PURCHASE PRICE – 4.2 billion for original execs.

Bingo! You hit the nail on the head. Steinhoff was a Ponzi scheme. where the “selected few” were to make money at the expense of everyone else.

The word Ponzi scheme (whilst appropriate)would imply that The Reserve Bank would have to investigate. Let’s face facts, they will not be inclined to investigate Steinhoff. Too many big names. They seldom, if ever, investigate real corruption ! Big business in SA has called the shots for many years.

That’s the type of greed behavior, we now know, can be expected from Jooste & co.

Claas Daun’s part of the business is what we know as KAP today. The mischief has been happening from 2000. They have been over valuing everything they procured and thats how they managed to scale up so big so quick. Watch the KAP space as well because its made from the same mould as Steinhof.

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