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Steinhoff’s claimants clash

Group maintains that not all shareholders are equal.
If the claim by Christo Wiese’s Thibault was calculated using the mechanism applied to that of an everyday investor, it would drop from R31.8m to R15.4m. Image: Waldo Swiegers, Bloomberg

If Steinhoff’s contractual claimants such as Christo Wiese-related entities and GT Ferreira were treated in the same manner as the thousands of shareholders who bought their shares in the market, Wiese’s proposed payout would be reduced from R7.9 billion to R1 billion and Ferreira’s from R421 million to R29 million, says a party acting on behalf of around 20% of Steinhoff’s shareholders.

Read: Steinhoff proposal under fire

Dublin-based Hamilton, which is managing a class action case on behalf of major institutional investors such as Ninety One, Allan Gray, Old Mutual, Coronation and Sanlam, has slammed the proposed settlement agreement as unfair and discriminatory.

In a letter sent to its Steinhoff clients last week, Hamilton said it is continuing to resist the settlement proposal and is also continuing its active litigation strategy in the Netherlands and South Africa.

Hamilton challenges Steinhoff’s rationale for dividing the claimants into market purchase claimants (MPCs), who comprise the vast majority of Steinhoff shareholders, and contractual claimants (CCs) such as the Wiese-related entities and former banker Ferreira.

Different treatment for different groups

Steinhoff then uses different mechanisms to calculate the two categories of claims in a manner that benefits the CCs and discriminates against the MPCs, says Hamilton. It notes that claims by Wiese’s Thibault “are recognised as being for 92% of the full purchase price of the shares and the claims of GT Ferreira and other contractual claimants are recognised at 94% of the full acquisition price”.

By contrast, instead of also being considered as a percentage of the full purchase price, all MPC claims are subjected to a so-called ‘inflation’ loss methodology says Hamilton.

It goes on to describe what must have been an immensely complex exercise.

“Under this method, economists briefed by Steinhoff have given an opinion of how much the share price was overvalued on each day between March 2009 and December 2017 as a result of Steinhoff’s misconduct. The claim value of MPCs is limited to this inflation amount. The inflation figure proposed by Steinhoff for each day ranges between 1% and 81% of the closing price on each day. On an average day, the inflation figure is only 40% of the closing share price.”

What this does to the figures

Hamilton says if the CCs’ claims had been subjected to the same process they would have been valued at a significantly smaller sum.

For example, Thibault’s claim (as a CC) was valued at R31.8 million; had it been valued in the same way as the MPCs it would have been reduced by 48% to R15.4 million.

Likewise Ferreira’s claim was valued at R1.1 billion but would have been reduced by 40% to R437.9 million if subjected to the ‘inflation’ loss methodology.

Yet more prejudice

The prejudice suffered by the MPCs doesn’t end with the ‘inflation’ loss methodology. Hamilton explains that the ‘recovery rates’ applied to the different claim values is also substantially lower for MPCs.

“Steinhoff applies a recovery rate of only 5% to Hamilton’s claims, compared to 18.7% for the Christo Wiese entities and 29.3% for the other contractual claims”.

The combined impact is that the proposed settlement will result in Wiese’s entities receiving 7.8 times more than they would if treated the same as the MPCs. Contractual claims by Ferreira and others are set to receive 14.7 times more than they would if subjected to the same treatment as the MPCs.

Steinhoff’s response

Steinhoff says its inflation loss methodology is a recognised basis of assessing the quantum of claims of class action securities claimants and allocating settlement consideration among them.

“Steinhoff considers it the appropriate approach to use here,” it says.

It defends the different basis of allocations between MPCs and CCs on the grounds that the CCs assert claims based on direct dealings with Steinhoff, which culminated in a contract for the acquisition of shares.

“Such claimants assert legal entitlements to rescind or cancel contracts on the alleged basis they were entered into on the basis of misrepresentations by Steinhoff’s representatives in pre-contractual negotiations and seek to claim back from Steinhoff the consideration paid for the shares,” says Steinhoff.

The methodology underpinning the CCs’ allocations reflects the legal nature of the CCs’ claims, it adds.

In addition, Steinhoff is relying on the high court judgment issued last year in the class action claim brought against the company by retired pensioner Anthea de Bruyn.

“The case shows that an absence of direct dealing with Steinhoff means there are higher legal hurdles for MPCs in establishing that SIHPL [Steinhoff International Holdings Proprietary Limited] owed them legal liability in respect of their share purchases,” says Steinhoff.

Fraud, not negligence

However in its letter Hamilton dismisses the De Bruyn precedent, stating: “This novel claim was run by a small personal injury law firm based in Johannesburg and it was based on a pleading of negligence.”

Hamilton adds that its claims have been brought on the same basis as a number of the contractual claimants, namely alleged fraud on the part of Steinhoff and Markus Jooste and other directors.

Other concerns raised by Hamilton in its letter include that Steinhoff takes no account of the fact that the CCs, unlike the MPCs, had the ability to undertake their own due diligence before acquiring their shares and that a claim brought by Wiese’s family “arises entirely from an alleged oral contract with Steinhoff’s then-CEO Markus Jooste”.

In addition Hamilton notes that as a member of the Steinhoff board since 2013 Wiese was better placed than nearly anyone to understand the true position of Steinhoff.

“To the extent that Thibault was misled by Steinhoff, this was the responsibility of the board and executives of Steinhoff, including Mr Wiese,” said Hamilton.

“It is difficult for a plaintiff to be compensated on the basis that it was misled by itself.”

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COMMENTS   17

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By this action the true rottenness at Steinhoff, past and present, is clearly on display.
How can preferential treatment be given to Christo Wiese, Chairman during the time of wrongdoing? He should receive LESS for dereliction of duty.

All claimants must be treated the same regardless of where they bought their shares from. The aggrieved claimants must all refuse this settlement that will give them a small peanut compensation for their losses, while giving far bigger compensation to powerful individuals that actually caused the collapse. Aggrieved claimants must rather join the Hamilton class action in order to sue for all claimants to be treated equally in distributing the total compensation amount.

Agree
But remember – Wiese and Ferreira are moving in the same circles as the CE Du Preez – – – – – buddy-buddy?????

All claimants should be treated equally; however those blatantly responsible for the collapse fiasco had malice of forethought, so I believe should be penalised through substantial or complete reduction of their compensation and should also be prosecuted criminally.

The finookery continues! I’m so pleased I never bought these shares….between The Zuptas and the Steinhoff crew, SA’s credibility has been reduced to an all time low from which we have not recovered!

”He was a self-made man who owed his lack of success to nobody”

Joseph Heller American Novelist (1923-99)

Maybe you shouldn’t only blame Markus Jooste – Where were all the fancy auditors – both external and internal?
Steve Booysen (with his team of Chartered Accounts) as head of Steinhoff’s Audit Committee, should have picked up the ”kite flying”) many moons ago. I was so surprised when I read that Booysen later explained to parliament that he suspected something was wrong – it was the ”kite” Steve, but what did you do about it?

By now we know the external auditors will claim to be the ”last line of defence” etc. and that somebody else should shoulder the blame for not picking up the financial irregularities.

I got to know a bit of this group (fx dealing side), way back in the late nineties and could never understand how a retail group like them (selling panties, shoes and mattresses etc) was considered such a sound investment and a darling of the JSE, as well as other various stock exchanges around the world – what did all the asset managers, see that I didn’t see?

Don’t blame the shareholders – ”a shareholder is a stranger to the company in its dealings with third parties”. Don’t blame Christo Wiese, he got advised by all the auditors- both internal and external – he is a lawman and a shareholder, period!

Greedy
Timing
Wiese has ALWAYS been involved – his claims that he was non-exec does not work for me. He managed from behind the phone, and on weekends on his game farm – (reimbursed for all his time consulting and making his plane and farm available) SO, check accounts to see how much he was involved.
He got Greedy – wanting to move his fortune abroad with minimal expense via SARS
Timing – before he could move Checkers in – he was caught short.
Wiese a normal shareholder – – definitely a NO

And both the Internal and external auditors sat and watched him and gave his carte blanche to do it? – no ways!

What is wrong with moving ”all your money” offshore?

Look at the JSE – what’s left besides Naspers?

What about globalization – dual-and offshore listings.

”a shareholder is a stranger to the company in its dealings with third parties”.

If Wiese didn’t know, he should have known. Responsibility is not exonerated due to ignorance.

This Christo fellow surely wouldn’t be the same person who was wandering around Heathrow with bags of money trying to get it through customs and thought it was quite legal?

The Steinhoff board comprised the crème de la crème of directors, but the cream turned into egg on the face, either exposing them to be just another bunch of self-indulgent fat cat directors or that Markus Jooste was the most brilliant of corporate deceptors, if not ranking in the all-time business misleaders gallery.

My guess is that they did not want to know what was there right before there eyes: its called greed.

The one guy with his board that was sleeping on the job was Wiese. His arrogance is unreal. He should get less because he and his board allowed Jooste to fool them.

Honestly, they Steinhoff deserve to go under after all the shenanigans and dodgy moves. I wouldn’t touch Steinhoff shares, even if the prices were good.

Will Steinhoff go after Wiese’s Southern View Finance for its complicity in the fraud? That was a R16,000,000,000 laundromat. Write-offs on crap loans avoided in Steinhoff, tax benefits to private Southern View on cleaning the book, huge reported earnings on the R16b unpaid purchase price, then sell back clean book for shares in Steinhoff. No cash involved : basically a one page spreadsheet of journal entries. And seemingly nothing qualified as reportable irregularity along the way, or as a related party transaction.

Hamilton must resist the settlement proposal and continue its active litigation strategy in the Netherlands & South Africa.
Individual investors (of Allan Gray, Coronation etc.) suffered great losses and should receive equal treatment.

Du Preez is in a lovely position:

plucked from his law firm by Wiese (to help Wiese’s claims).
appointed CE
paid a whackload of money as CE
massive fees earned by his ‘old’ law firm for ‘helping’ Steinhoff
once this is all over – his job at old lawfirm remains with massive benefits.

The man can not lose – win-win – but helping Wiese and buddy’s into preferential positions could make him the celebrity he wants to be????

Ann – lets see if you will allow this post – – – – – perhaps my views are too close to the truth- – – – – ??

Achievements by Steinhoff in the last 3 years:

Successfully restructured Mattress firm in the USA,

Sold many assets such as PSG Captial Shares, Kap, Properties and more,

PEP South Africa and Africa are growing,
Pepco, Conforma and the other EU businesses were restructured and are growing,

A creditors agreement was reached to repay debt,

Preference shares can now also be traded again.

# I believe this will be the next steps for Steinhoff

1. Shareholders settlement – I think it is better for everybody to accept the settlement, history shows us that shareholders tend to get much less after they go to court. Court battles can take years to finish and are very expensive.

2. Hawks to finish the investigation into Steinhoff.

3. Steinhoff to start taking legal action against all the people involved in Stealing.

Remember if they can get through this the share price might start recovering and people could actually get some money back.

End of comments.

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