Wednesday, January 26

Steinhoff Paves the Way to Complete Global Claims Settlement


It was a big surprise that Steinhoff International Holdings announced that it had reached settlements with two of the parties that were aggressively seeking redress for damages suffered due to the accounting scandal that came to light in late 2017.

In both cases, one instituted by vendors who sold the well-known Tekkie Town chain to Steinhoff and the other by Trevo, a Mauritius-based investment trust listed on the Mauritius Stock Exchange, the unexpected deals came after failures legal proceedings against Steinhoff.

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These court rulings effectively stopped, and had the potential to delay for years, a comprehensive settlement agreed upon between the affected parties and Steinhoff.

Read: Steinhoff initiates conciliation proceedings

Clover

Trevo won a Western Cape Superior Court ruling that Steinhoff and, by implication, his board of directors, violated the Corporation Act in certain cases, misrepresenting financial results, trading recklessly, negligent, and defrauding the public.

Read: FSCA fines Markus Jooste and three others around R241m

Trevo claimed R2.1 billion in damages for losses he suffered on a long position at Steinhoff when the share price plummeted from nearly R62 to less than R5 in a few days during the first week of November 2017.

The Trevo claim settlement is interesting because there will be no money changing hands, and also because of the people involved.

Steinhoff’s announcement states that Ainsley Holdings Pty Limited (an indirect subsidiary of Steinhoff) will grant Trevo call options to purchase 120 million shares of Pepkor, an option that can be exercised in three years at an exercise price of R24.92 per action. subject to applicable adjustments in certain limited circumstances.

The announcement says that Trevo has agreed to support the Steinhoff global settlement upon satisfaction of the precedent and, on the effective date of the agreement, will withdraw all litigation between Trevo and Steinhoff in a full and final settlement of claims against the Steinhoff group. and its directors. , officials and auditors.

The price of the purchase option of Trevo’s conditional agreement to withdraw his legal claims is particularly interesting.

With an exercise price of R24.92 per Pepkor share, the option is a far cry from the money considering that Pepkor is currently trading at around R21 and Trevo’s original claim was R2.1 billion.

Alternatively, Trevo must be confident in Pepkor’s growth prospects and that he will recoup the losses suffered on his previous investment in Steinhoff.

Steinhoff says the settlement of Trevo’s “alleged” claims will not affect recoveries from other creditors in the scheme under the Section 155 proposal, in addition to financial creditors. Therefore, the approval of the financial creditors is a condition precedent to the proposal.

Steinhoff CEO Louis du Preez says the deal with Trevo will be another step toward finalizing the implementation of the Steinhoff global deal.

“We continue working to satisfy the conditions precedent for Trevo and, subsequently, the approval of the SIHPL. [Steinhoff International Holdings Proprietary Limited] Proposal for S155 by the Western Cape Court in January 2022, ”says Du Preez.

Regarding the people behind this, Steinhoff stated in the announcement that the deal with Trevo opens the door for Pepkor to speak with Pieter Erasmus regarding “a future role” on Pepkor’s board of directors.

Erasmus is a former Pepkor CEO and director who resigned unexpectedly when the Steinhoff scandal broke out, and was involved in the legal proceedings against Steinhoff on Trevo’s behalf, apparently controlled by his family’s trust.

Tekkie Town Vendors

It should be noted that the relationship between the former owners of Tekkie Town and Steinhoff has also improved, to such an extent that Steinhoff included a direct quote from Tekkie Town founder Braam van Hyssteen in the formal announcement of the deal.

“We are pleased to have reached an agreement with Steinhoff that will take effect from the effective date of the agreement on Steinhoff’s proposed global settlement,” Van Huyssteen says in the announcement.

“We will support Steinhoff to implement the agreement as soon as possible.

“We are pleased to become shareholders in Pepkor and we are looking forward to concentrating on our business.”

This sentiment is in stark contrast to the arguments over years of bitter legal proceedings.

The arguments often spread into the public domain, during which the Tekkie Town vendors insisted that they were being paid with worthless Steinhoff stock and that they will continue to fight until their business is recovered.

Du Preez repeated that the agreement with the Van Huyssteen group is another positive step towards finalizing the implementation of the global Steinhoff agreement.

Commitment

The deal seems like a good compromise. The formal statement says that Steinhoff will settle the claim against him for R500 million in cash and 29.5 million shares of Pepkor. The shares are worth more than R620 million at the current share price.

In return, the founders of Tekkie Town will effectively suspend their application for Steinhoff liquidation and any other legal challenges.

Read:

Bernard Mostert, one of the founders and former CEO of Tekkie Town, and now CEO of Mr. Tekkie, let Moneyweb slip that the terms of the deal were agreed upon and the deal was signed only on Wednesday morning, and after just a few weeks of negotiations.

“The negotiations started at the end of November,” says Mostert.

“We were happy to take the legal process to the end, as it was the most logical and rational remedy available to us. However, we have come to expect the unexpected.

He also hints that the Tekkie Town group of entrepreneurs have found an exciting new niche with Mr. Tekkie, and that they are very happy with him.

Read: Tekkie Town Two On The Wings

Mr Tekkie has grown rapidly and announced a merger with the well-known Busby a few months ago.

Mostert and Van Huyssteen say it was primarily intentional to keep the new Mr. Tekkie different from Tekkie Town, and argue that the two businesses are complementary.

In an earlier legal battle to evict Pepkor from the then Tekkie Town headquarters in George (which is owned by Van Huyssteen), the argument was that he wanted to execute Mr Tekkie and Tekkie Town side by side from the building, once they got Tekkie Town. back from Pepkor.

Now Mostert says things are going well at Mr. Tekkie and the understanding is “that successful litigation and the return of control of the business would likely negatively affect the momentum we enjoy in our current business.”

“Our focus now is to keep moving forward and we take pride in the fact that we have built a successful business and are looking forward to doing it a second time,” says Mostert.

“Wherever Tekkie Town goes and wherever Pepkor takes it, we are proud to have delivered it in good shape. Our journey to build and fight for it has shown how much we care for Tekkie Town and wish them the best to move forward without us.

It adds that an equally important consideration was the fact that participation in the agreement will allow South African class action participants to share in the proceeds of the agreement.

“This will address, to some extent, the losses they suffered at the hands of the Steinhoff scandal,” Mostert says.

On a personal note, I’m willing to bet R10,000 that the sudden willingness to negotiate the deals with Trevo and Van Huyssteen started with a friendly phone call rather than a legal brief.


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