Steinhoff expects his highest offer to shareholders, made by Steinhoff International Holdings (SIHPL), the former SA holding company of Steinhoff’s businesses, to finally end some of the legal claims that have dragged on for years.
In one of a series of announcements in recent days, Steinhoff announced that he had increased his offer to so-called market buy claimants by R3.2 billion after shareholders and bodies acting on behalf of shareholders did not accept. previous offers. Market buy claimants are investors who bought stocks on the stock market just before it came to light that the companies’ financial reports were misleading.
The additional contribution will be allocated proportionally among the claimants of the SIHPL market, according to the announcement. The amount each shareholder will receive can only be determined later, when it is clear how many shareholders have filed claims.
According to the announcement: “While Steinhoff has received positive responses to his July 16 offer, there are indications that he has attracted insufficient general support to achieve certainty of the outcome in the proposed SIHPL section 155 process.
“Recognizing that recent disputes center around SIHPL’s proposed settlement agreements, Steinhoff has considered whether a further and final increase can be made to SIHPL’s settlement offering to achieve the necessary levels of support. “Therefore, Steinhoff now proposes that SIHPL make an additional contribution to the settlement consideration of the SIHPL market purchase claimants of R3,214 million.
“Steinhoff believes that the adjusted proposed settlement can resolve both inherited claims and, in the case of SIHPL, more recent disputes.”
The highest bid has bought the support of Hamilton, one of the most aggressive groups of shareholders fighting for damages after shareholders lost billions when the share price plummeted in 2017 following revelations that it had big differences in reported results and reality.
“Hamilton supports, in principle, the Steinhoff global settlement based on this increased contribution from SIHPL and will withdraw from the class composition request which has been deferred to August 13, 2021 on that basis,” says Steinhoff.
“Hamilton’s final approval of proposal S155 will be subject to the ongoing claims verification process.
“SIHPL confirms that it has received confirmation that Steinhoff’s four major financial creditors (funds managed or advised by The Baupost Group, LLC, Farallon Capital, Sculptor Capital Management and Silver Point Capital) support this new review of the settlement term.”
Steinhoff forced hand
Ongoing legal challenges from Hamilton forced Steinhoff to come up with a better offer, and Steinhoff CEO Louis du Preez admitted that the group faced opposition resulting in legal proceedings related to the particular terms of its previous settlement proposal. .
“The additional contribution proposed by SIHPL to the general agreement is in response to those challenges. We continue to believe that a global agreement is in the interest of both SIHNV and SIHPL and indeed the entire group, ”says Du Preez.
As before, he urged shareholders to vote in favor of the plan to resolve “inherited accounting problems” and let management focus on running the group and recouping some of the losses. In one of his previous announcements, Steinhoff noted that resolving disputes is essential to the future of the Steinhoff group.
Read: Steinhoff’s pay is sure to arouse shareholder ire
Steinhoff has called (virtual) meetings of the different creditor and claimant groups to vote on the final and improved offer on September 6.
The deal doesn’t come close to addressing losses. A summary of the new improved offer shows that the total amount offered to settle claims from financial creditors, market purchase claimants and contract claimants has increased to € 1,426 million, equivalent to R24,770 million at the rate. current exchange rate.
Investors suffered much greater losses. Depending on where you started, Steinhoff shares plunged as much as 90%. At its all-time high of R97 per share, the group was valued at almost R418 billion.
The current share price of around R2 values the entire group at just R8.62 billion, a loss of more than R408 billion.
Just before the financial irregularity came to light, Steinhoff was trading at R67 per share, which valued the group at R267.2 billion.
Using this as a starting point to calculate shareholder losses would produce a total loss of more than R258 billion.
At best, the R24.77 billion settlement offer offsets less than 10% of the losses suffered by shareholders directly. Managers of index tracking funds and similar products are expected to file claims on behalf of their investors.
Claims ‘not entertaining’
Some claims are not covered in this offer and legal disputes are ongoing.
The latest settlement offer notes that a claim for more than R 1 billion by Mauritius-based Trevo Capital is excluded.
Steinhoff maintains that he disputes and will continue to dispute Trevo’s claim. It also says that the particular circumstances that gave rise to Trevo’s claim cast doubt on the advisability of treating him as a marketplace purchase claimant and therefore reclassified the claim as an unqualified claimant for the purposes of the settlement.
A dispute with the Tekkie Town sellers is also ongoing, with the previous owners pursuing the liquidation of Steinhoff.
Reports that Steinhoff is beginning to file lawsuits against alleged infringers indicate that shareholders cannot expect to recoup much of their losses from this source.
Steinhoff filed a lawsuit against Malcolm King, a British businessman and apparently a former business partner of former CEO Markus Jooste, according to an Opera News report.
The report states that “subsidiaries of the Steinhoff group claim to have a lot of evidence by email showing how Jooste, King and others planned to fraudulently transfer money from Steinhoff to King-owned firms.”
If successful, it will bring in R1.66 billion at current exchange rates – a lot of money, but a drop in the bucket compared to the total losses suffered by shareholders.
Court cases will continue for years, with the administration warning in the latest results for the six months through March 2021 that legal advice fees are expected to remain significant in the next period as we attempt to resolve pending litigation and seek redress. against former executives and related parties.