Steinhoff International shares finished 4% lower on Wednesday after a media report revealed that the retail conglomerate did not inform investors about deals worth $1 billion (R14.2 billion at the time of writing).
Steinhoff’s share price on the JSE fell by 4.20% to R59.30 after a Reuters report said the German-listed retailer did not inform investors about material transactions with a related company despite European laws that require it to do so.
The company’s share price in Frankfurt declined in a narrow range of 3.5% to 4%.
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.
The acquisition would enable Steinhoff to continue to invest, develop and strengthen its global manufacturing furniture brands. Over the past two-years, Steinhoff has moved to acquire global furniture and homeware businesses including Poundland in Britain, Mattress Firm in the United States and Conforama in France.
According to the Reuters report, European financial disclosure rules, including the European Union Prospectus Directive, stipulate that publicly-traded companies must disclose all transactions that are material in the prospectuses they present before a debt or equity sale.
Steinhoff listed on the Frankfurt Stock Exchange in December 2015.
The Reuters report also referred to a law that says a material transaction is one that is big enough to influence investors’ view of the firm’s financial health. However, the law does not define the details of a material transaction. The details of Steinhoff’s non-disclosure to investors about the GT Branding Holding transaction emerged from publicly available company filings that have not previously been reported.
Sources told Reuters that the GT Branding Holding transaction was large enough to be material and that European Union rules also require disclosure of all transactions with related parties.
In a JSE news service announcement, Steinhoff said its reporting and investor information regarding all transactions between it and GT Global Branding are in line with all International Reporting Standard requirements including internal accounting rules and the Prospectus Directive.
Markus Jooste, the CEO of Steinhoff International, said: “all reporting requirements have been met. This has been confirmed by our internal legal team and external experts.”
In its annual accounts from September 30, 2016, GT Branding Holding formed part of Steinhoff’s associate investments, the company said. The equity in GT Branding Holding is shown in investment in and loans to associated companies, it added.
“The funding supplied to GT Branding Holding is shown under short term loans and amounted to €339 million. Loans bear interest at market related interest rates. In terms of IAS 24, the net amount for the 2016 September financial year amounted to zero and therefore no disclosure was made as the related party transaction was zero.”
IAS 24 is an accounting standard that ensures that financial statements contain the necessary disclosures.
The latest non-disclosure allegations follow a separate investigation into Steinhoff for its suspected accounting irregularities in Germany. The investigation is ongoing and Steinhoff has denied allegations of wrongdoing.
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