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Wiese endorses Steinhoff’s R19bn settlement plan

Precedent-setting proposal could see ‘market purchase’ shareholders who suffered losses compensated with R5bn.
Creditors might prefer Steinhoff to take its chances with prolonged legal action. Image: Dwayne Senior, Bloomberg

Former Steinhoff Chairman Christo Wiese says the $1 billion* proposed settlement announced by Steinhoff on Monday “is a step in the right direction”. Wiese, who is the single largest claimant seeking recourse from the company said that when he issued summons against Steinhoff in April 2018 “I wrote a letter saying in my view the only sensible way forward for the company is reach a settlement with all creditors and claimants.”

Wiese’s endorsement followed that of Dutch shareholder association European Investors-VEB, which urged shareholders to support the proposal, aimed at bringing an end to a long-drawn out and extremely expensive legal battle. If implemented the proposed complex settlement will establish a precedent in South Africa by compensating shareholders (referred to as the ‘market purchase claimants’) for losses suffered as a result of a collapse in the value of their shares. If the deal is agreed, as proposed, Steinhoff shareholders will get €266 million (R5.16 billion).

Concerns

While the proposal reflects remarkable progress by the Steinhoff board it is still far from final. Not only does the board have to secure agreement from a large number of claimants scattered across the globe, the group’s creditors must also sign off on the proposed settlement.

To be expected, given the complexity and the number of parties involved in the settlement, there are concerns; the most notable of which is that the $1 billion valuation is significantly inflated by the overstatement of the current value of Pepkor shares. The settlement plan is based on paying all claimants 50% in cash and 50% in Pepkor shares, which are valued at R15. Pepkor is currently trading at R10.50 and last traded at R15 in early March ahead of the Covid-19 lockdown. However the R15 valuation is underpinned by a net asset value of just over R16 a share.

Wiese may get R9bn

In absolute terms Wiese looks set to be the single largest beneficiary of the proposed deal with a possible total payment of around R9 billion. This compares with his claim of R59 billion and needs to be seen in the context of a R3.4 billion claim Steinhoff has for a loan made to Wiese’s Titan group in early 2018. In addition a large portion of any money paid to Wiese is subject to claims by Conservatorium, which is the legal successor to a group of financial institutions that extended a €1.6 billion loan to Wiese in 2016. In the press release issued on Monday, Steinhoff said payment on Wiese’s claims would be subject to a resolution between him and Conservatorium.

Wiese is one of three Steinhoff NV ‘contractual’ claimants dealt with in the proposed settlement. The other two are Lancaster 101, which is controlled by Jay Naidoo and the PIC, and Tekkie Town. Lancaster/PIC are set to get €15 million and Tekkie Town €6 million.

Other parties claiming against Steinhoff SA include former banker GT Ferreira who is expected to receive R421 million and the Le Toit trust, which is tagged to get R227 million.

Read:
Double whammy hastens retirement of once richest South African
Wiese’s Steinhoff claim challenged in court

The largest portion (R7.9 billion) of the proposed payment to Wiese is based on his claims against Steinhoff Investment Holdings Pty Limited and relates to his exchange of Pepkor shares for Steinhoff shares in 2014 before its primary listing was transferred from Johannesburg to Frankfurt.

Eye on the future

In a statement released on Monday VEB CEO Paul Koster said the proposal is in the best interest of all the parties involved. “It is a positive proposal for injured shareholders which shows Steinhoff’s commitment to resolve those issues in very challenging circumstances,” said Koster, adding that implementation of the proposal would allow Steinhoff to focus on the future, which would be in the best interests of the current Steinhoff shareholders. “European Investors-VEB recommends that all its partners, members and other constituents support the proposal and its implementation,” said Koster.

Read: Steinhoff share price surges

One analyst said that securing the necessary backing of the creditors might be the biggest challenge as it meant that the asset value backing their claims would be reduced by €1 billion. “They might prefer that Steinhoff takes its chances with prolonged legal action especially if they’re earning a good return on their lockup agreement,” said the analyst.

The proposed payment to shareholders was described by one lawyer as ‘surprising’ in the context of the recent High Court ruling, in which Judge David Unterhalter refused to certify a class action on the grounds that it would not be successful because South African common law does not provide for claims by shareholders.

Read: Steinhoff class action found not triable

*Erroneously first published as €1bn

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The fat cat investors (wiese , GT ect) , should have done their homework.

A settlement like this is just as criminal as the fraud that took place in the first place.

The company (Steinhoff), can’t be liable here . Jooste and his 8 insiders should be criminally charged. Wiese and co made a bad investment and should take a knock on the chin just like everyone else.

What will happen to the Pepkor share price after this ?? Why is pep being dragged in here , it’s the only viable business now these shareholders are fitting the bill !!!

Agree – but then – it seems in modern SA business, shareholders have to bail out investors who are well connected.

Wiese is NOT a victim – the truth will come out, he was as greedy as they come and is used to getting his way with control and special treatment with borrowed money.

His business life has ended – will not be able to do another deal on borrowed money and will not be trusted by me, and others again.

Good old Stellies – – i recall walking to court one day with counsel and we saw a newly appointed Judge.
I asked whetehr he is expected to be a good Judge, and my counsel (who came from Stellenbosch Univ) said – YES.
When I asked why did he say that as the Judge was not known in the local bar, he answered: He was at Stellenbosch!!!
GT and many others trusted Wiese and Jooste based on being from Stellenbosch.
But, the ‘old’ money, Ruperts and Oppenheimers did not – – – – – and its clear for all to see the result.

I agree, Steinhoff and Pepkor (owned by shareholders) was a victim of fraud, and is being bullied to pay for something it didn’t do.
And South African courts last month has dismissed a class action against Steinhoff, because it doesn’t make sense within the law.

There is something I don’t understand and I hope someone can explain this to me. As I understood the court decision, the shareholders cannot take on the directors, but the COMPANY must take on the directors. And given that the company is run by it’s directors, this seems to be a problem.

What I don’t understand is why don’t the shareholders merely replace the directors with new one, and then the NEW directors take on the old ones on behalf of the company, which the law allows.

What am I missing?

Get on the rocket ship. Bullish.

5% of claim value as everyone knew.

Is Jooste paying off the national prosecuting authority or are there no skills left in the NPA to prosecute white collar crime? Maybe it is both…???

I am telling you this ou Wiese is not so innocent.

This is exactly why we will not see prosecutions for the Guptas or Zuma – those with political and economic clout are the biggest crooks and get away with the crimes they knowingly commit because they’ve done a backhanded deal with the lawmakers…. it’s is disgusting. Corruption in this country will never end until ALL perpetrators face jail time. It started off with Zuma and the Shaik brothers getting away with the Arms Deal and has ended with Steinhoff/African Bank/ Tongaat …this has given the ANC and municipalities confidence to swindle millions from innocent tax and rate payers….
And now the IMF and World Bank funding proposal will become the next trough from which to engorge themselves.
The shame of it. Cry the beloved country…cry indeed.

Gosh and there pops up Jay Naidoo. Not bad for a full blown socialist ANC Minister

Thieves doesn’t go to jail in this country.

The offered settlement is about 0.75 billion euros (depends on the eu zar / zar eu exchange rates) (so not 1 billion euros).

It is Jooste and the criminals who benefited that should be paying the claim, not the company and its shareholders who have already lost out.

End of comments.

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