Steinhoff to sell part of stake in KAP to help settle debt

Mar 13 2018 11:08
Carin Smith

Cape Town - Steinhoff [JSE:SNH] announced in a statement to shareholders on Tuesday that it has decided to sell part of its stake in KAP Industrial Holdings.

The Stellenbosch-headquartered retailer said it was launching an accelerated book-build of up to 450 million ordinary shares in KAP. If successfully completed, this would decrease Steinhoff's holdings in KAP from 43% to 26%. 

The sale is subject to acceptable pricing being achieved, and certain additional conditions.

Through an indirect wholly owned subsidiary, Steinhoff currently owns 43% of KAP.

According to Steinhoff this shareholding has created material value to Steinhoff shareholders since 2012 due to KAP’s growth. And while the global furniture conglomerate said it continues to view KAP as a "compelling investment case", it was looking to sell the shares in order to settle certain debt obligations.

On successful conclusion of the placing, Steinhoff said it would retain ownership of approximately 26% of KAP’s issued share capital, which it views as a strategic investment.

The placing shares will be offered to qualifying institutional investors only. Steinhoff said the placing does not constitute an offer to the public to purchase any shares. The placing will be jointly carried out by Standard Bank and Investec Bank. 

"The book will open with immediate effect and is expected to close as soon as possible. Steinhoff reserves the right to close the book at any time. Pricing and allocations will be announced as soon as practicable following the closing of the book," said Steinhoff.

In line with Steinhoff’s intention to retain the remaining interest in KAP Industrial, Steinhoff has agreed to a 90-day lock-up period, subject to customary carve outs.

Steinhoff shares were trading up 2.05% on the day at R4.49 a share at 10:45. Shares in [JSE:KAP], meanwhile, were down 2.94% at R8.25. 

A question of debt 

At the end of February Steinhoff said in a quarterly market update that it was continuing to take steps to refinance or redeem debt within its SA operations.

The conglomerate has been facing liquidity issues since early December, when its former CEO Markus Jooste abruptly stepped down after the group's auditors flagged financial irregularities in its books.

These irregularities are the subject of an on-going forensic probe by PwC. 

Steinhoff's senior management, including former chair Christo Wiese, briefed Parliament last month on the financial irregularities that caused the conglomerate's share price to fall by over 80% since December 5, erasing roughly R200bn in shareholder value.

Wiese told the parliamentary committee that the problems at Steinhoff came like a "bolt out of the blue" to him.

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