THE STEINHOFF SAGA: Part one - The making of a corporate giant

In a series of in-depth features, the University of Stellenbosch Business School sheds light on Steinhoff's remarkable growth – and spectacular collapse. This is Part One: from humble beginnings in Germany to a massive global holding company.

Business perspectives on the Steinhoff saga

The Steinhoff saga, possibly the biggest case of corporate fraud in South African business history, has dominated financial and general news since the company’s share price collapsed on December 5, 2017. Part of our role as the University of Stellenbosch Business School is to reflect on real-life business cases and to extract general lessons to be learnt. Much can be gleaned from business success stories, but even more revealing, sometimes, are business failures.

In presenting this mini case study on Steinhoff International, we find no joy in knowing that significant financial losses have been incurred not only by institutional investors and leading business personalities, but also by millions of ordinary people. Living and working in close proximity to Stellenbosch, we see the painful effects of the company’s reputational loss on friends, employees, pensioners and families; not to mention the misery caused to people around the world by the swift financial decline and uncertain future of this once-revered global retail giant.

In offering an academic perspective on the Steinhoff case, a certain objective distance is required. However, we are perhaps still too close to events to provide a full interpretation. We have also had to rely on information in the public domain, which is limited in depth and scope.

As the financial affairs of Steinhoff were still not clear at the time of writing, we could not, for example, compile a section on the accounting and corporate finance practices or tax structures of Steinhoff in different parts of the world. Nonetheless, we provide readers with important insights into how a supposedly indestructible corporate brand can be practically annihilated in (what appeared to be) unethical conduct.

This mini case study comprises four sections:

In section one (published below), we tell the remarkable story of Steinhoff, from its humble beginnings in Germany to its transformation into a massive global holding company, epitomising the spirit of entrepreneurship and business expansion at its best. To assist readers, we provide two tables: one with a list of the most significant mergers and acquisitions concluded, and one with the time-line of events leading up to the collapse of the share price in late 2017 and beyond.

In section two, we analyse Steinhoff’s governance structure and practices in the light of relevant rules and guidelines at different times. We also comment on matters like director independence and the impact of a two-tier board on the critical and discriminating mind-set required of directors.

In section three, we reflect on business leadership and two aspects in particular, namely the ambiguity of charismatic leadership and the rationalisation strategy typically adopted by leaders who lose their moral compass.

In section four, we conclude the case study by looking back at earlier sections and extracting the main business lessons to take away. We also leave the discussion open for additional interpretations, particularly as events continue to unfold.

The overall aim of this mini case study is not to further discredit Steinhoff or any specific individuals, but rather to distil business lessons that might alert people to new Steinhoffs in the making. As a business school, we understand and value the enormous contribution that entrepreneurs and private corporations make to society. In this regard one of our passions is providing the type of education and guidance that will help breed a new generation of ethical and socially minded business leaders.

When the Zuma administration dragged whole sectors of the South African economy into a web of corruption and state capture scandals, many people said: "This is what politicians and public sector people do".

We know, though, that corruption is not only found in government; it is commonplace in the private sector as well. When lapses in morality are exposed in the private sector, it unfortunately provides useful ammunition to those who are generally suspicious of business: "Those guys only look after themselves and will do anything to enrich themselves further." This distrust erodes the already fragile relationship between government, labour and business without which South Africa – and for that matter any developing country – will not be able to tackle poverty, unemployment and inequality.

It is time for the blame game to end. Alleged and proven cases of unethical business practices involving many reputable international companies should be a shrill wake-up call as to what can go wrong in an organisation. If there is a risk of significant financial loss occurring owing to unsavoury or unethical business practices, how might this risk be averted? What can the Steinhoff story teach us in this regard?

Because no formal legal processes have yet been concluded, all references in the case study to fraud and corruption linked to individuals or Steinhoff as a whole remain allegations at this stage. No sponsorship was received for this study, which secures the independence of its approach and findings. It should be noted that the views expressed are those of the authors only and should not be attributed to the University of Stellenbosch Business School or the University of Stellenbosch.

The authors:

Piet Naudé (Editor) is Director of the University of Stellenbosch Business School.

Brett Hamilton holds an MBA from the University of Stellenbosch Business School where he is a visiting lecturer in Corporate Finance. He is also a director of First River Capital.

Marius Ungerer is Professor of Strategy at the University of Stellenbosch Business School.

Daniel Malan is Associate Professor of Corporate Governance and Head of the Centre for Corporate Governance in Africa, based at the University of Stellenbosch Business School.

Mias de Klerk is Professor of Leadership and Human Capital Development, and Head of Research at the University of Stellenbosch Business School.

PART ONE: THE STEINHOFF STORY

In this section we look at the remarkable Steinhoff [JSE:SNH] success story, which spans 55 years and is defined by three successive periods of business expansion: (1) the expansion from West Germany to the East (1963 - 1993); (2) the new era of expansion to the South (1994 - 2013), and (3) the last few years signalling Steinhoff’s ascent as a truly global retail company (2014 - 2017).

1. The first three decades: Looking East (1963 - 1993)

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"Can you develop factories as well?"

I said, "OK, I will do so." And so I did. - (Bruno Steinhoff, founder of Steinhoff International)

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The company first became involved in sourcing and selling household goods in 1963 when its founder, an enterprising West German by the name of Bruno Steinhoff, saw an opportunity to procure low-cost furniture from East Germany and sell it to his more well-off countrymen in West Germany. It was a game of arbitrage that helped shape the Steinhoff we know today as well as a core business strategy that the company vigorously pursued, enabling it to become one of the largest retailers in the world.

Bruno clearly had a knack for selling furniture and the business quickly flourished, but it also required hard work, determination and an entrepreneurial spirit. Like so many entrepreneurs, Bruno came from humble beginnings. His first office was in a privately owned home. He then moved the business to a small warehouse near Hanover in Germany which soon filled up with furniture. Bruno spent many nights sleeping in his car, to which he had hitched a trailer, as he travelled all over Europe visiting retailers and showing them his products.

It was not only his selling skills that served him well; he was also able to cross both physical and mental boundaries to source low-cost products from regions and suppliers that his competitors were either unaware of or unwilling to connect with. At the time, Europe was a fractured region comprising a mixture of communist, capitalist and authoritarian regimes. It was Bruno’s innate ability to navigate and adapt to ongoing political, economic and social change that ultimately ensured the success of Steinhoff and to a large extent remains a characteristic of the business today.

In the early days of Steinhoff’s operation, the Cold War was intensifying and the West generally remained sceptical of the East. But this did not seem to deter Bruno. During its first ten years of operation, the company plied its trade almost exclusively in Eastern bloc countries. Naturally, Bruno was aware of the myriad commercial opportunities in these areas and was determined to grow his business. This is a further reflection of the ease with which he was able to transcend national borders, languages and cultures. By the late 1970s the company was sourcing furniture from East Germany, Bulgaria, Denmark, Italy, the Netherlands, Romania, Czechoslovakia and Russia.

The business also took advantage of the economic opportunities presented by strong post-war government spending, various incentives for industrial growth and the general preference for intra-European trade. Within two years of Steinhoff’s establishment, Bruno had managed to secure the exclusive rights to represent suppliers in the Saxony and Hessen regions in Germany. In 1966, he registered the company that would later become Steinhoff Europe, i.e. Bruno Steinhoff Mobelvertretungen und-Vertrieb. Soon after that, a new head office and large factory were built in Westerstede, with the company undergoing further expansion during 1971.

Although the business of importing and trading was going well, Bruno decided to diversify into furniture production. This was in line with his vision to grow, expand and own the supply chain – another characteristic of the business that has survived to this day. By 1973 deliveries to the Westerstede facility had increased to 274 wagons per annum (from 48 wagons in the early years) and turnover had reached DEM40 million. At that point the company employed 105 people.

Strong economic growth in Europe ensured that demand for furniture continued to expand. Keen to take advantage of buoyant market conditions, the company constructed a second factory, Trend Design, for upholstered furniture in Remels, Germany. The company’s brand was clearly growing in stature, underpinned by a reputation for providing high-quality, low-cost furniture. By 1980 the company’s sales network included representatives in Germany, Austria and Switzerland and exhibitions were held in England, the Netherlands, Belgium and Switzerland.

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"He had an infrastructure. What came out of there in terms of productivity and what they got right in those days was unbelievable." - (Danie van der Merwe, acting CEO, Steinhoff International)

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It is often said that fortune favours the brave. Bruno’s preference for sourcing low-cost furniture from the East served the company well during the general global recession in the latter part of the 1980s. The company’s focus on value meant that it was perfectly placed to cater to the needs of cash-strapped consumers. Despite operating under tougher economic conditions, the company continued to grow (specifically through exports). This necessitated a further expansion of its Westerstede warehouse and the start of sourcing operations from China – making Steinhoff one of the first companies to import from China. This perfectly illustrates Bruno’s keen awareness of the drivers of value within his business and his lack of fear or bias when making strategic decisions.

By 1983, furniture deliveries had reached 1 000 wagons per annum and annual turnover was DEM230 million. The number of employees had risen to 320. As can be seen, the company was successful, growing and becoming a global operator. Keeping up the momentum required investment and for the greater part of the 1980s the company made large capital investments to bolster its sourcing, manufacturing and distribution capabilities. These investments included a new administration building in Westerstede, an extra 2 000 m² of capacity in the Remels factory and a giant (45 metre-high) warehouse in Westerstede, built at a cost of DEM20 million, which used a state-of-the-art warehouse and management system to control the furniture receiving, packing, storing, retrieving and dispatching processes. This system was paperless and fully automated, a feature that was revolutionary at the time.

The fall of the Iron Curtain in November 1989 presented the company with a massive opportunity for expansion in Europe. 'New Europe', as it was often referred to, became for all intents and purposes a continent 'without borders', thus allowing the free movement of goods and services across borders and, naturally, a united Germany.

The business opportunities linked to this new European configuration were immense. Furthermore, in an effort to develop the region, the new German government began offering incentives for businesses to invest in the former East Germany. Manufacturing facilities in the former East Germany were outdated and no longer received government funding, which meant that businesses either had to adapt or face closure. In addition, the management of these businesses were often ill-equipped to operate in a for-profit business environment. Consequently, given its knowledge of and experience in this region, Steinhoff was in a very favourable position and the company soon bought out its East German suppliers.

In total, the company purchased seven upholstery factories and one bedding factory at very attractive prices. While the factories required significant amounts of capital to upgrade, the result was that Steinhoff became one of the largest producers of upholstered furniture destined for the German market, with company-owned factories located in Germany, Poland, Ukraine and Hungary. The company also made strategic investments in numerous import trading companies in the Netherlands and Italy and extended its sales reach to France and Austria.

By 1993, revenue was DEM600 million per annum and the company employed 3 000 people.

2. A new era: Looking South (1994 – 2013)

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"The Steinhoff group is an integrated lifestyle supplier that manufactures, markets, warehouses and distributes household goods and timber-related products." - (Bruno Steinhoff, founder of Steinhoff International)

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With the collapse of apartheid and the lifting of international sanctions against South Africa in the early 1990s, many international companies saw an opportunity to invest in the country. In doing so they could reach a large and untapped consumer base and use the market as a launching pad for operations in the rest of Africa.

At that time, Claas Daun (a tax attorney who was later to become a non-executive director of Steinhoff International) was responsible for monitoring 'at-risk' companies for an international bank. From time to time he also made direct investments into these companies and engineered turnarounds, which is what happened in 1993 when Daun & Cie bought a controlling interest in the ailing Victoria Lewis, a JSE-listed furniture manufacturing company. In 1995 the company invested in Gommagomma Holdings, which consisted of Gommagomma, a manufacturer of middle- to upper-market household furniture, and Bakker & Steyger, an Epping-based company specialising in upper-end household furniture.

It was then that the paths of Bruno Steinhoff and Markus Jooste would cross: Bruno and Daun had been acquaintances in Germany and Jooste was Daun’s CEO. Not long afterwards, in 1997, Bruno Steinhoff acquired a 35% stake in Gommagomma from Daun & Cie.

Daun and Jooste formed a friendship and in 1997 made an unsuccessful bid to purchase Afcol, a large furniture manufacturer that was being offloaded by SAB as the company was streamlining its operations. The winning bid came from Pat Cornick.

During 1996, Jooste floated the idea of merging the South African assets of Daun with Steinhoff Europe and by 1998 Steinhoff Europe and Steinhoff Africa (formerly Gommagomma) had consolidated their operations. Steinhoff International Holdings listed on the JSE in 1998. At the time, Steinhoff International was still a relatively unknown player in the market but (in a strange twist of events) a few months after its listing, the company managed to acquire the struggling Pat Cornick (including the assets of Afcol which had slipped through Duan’s and Jooste’s fingers two years earlier). This made Steinhoff International one of the largest furniture manufacturers on the JSE and, continuing the Bruno Steinhoff tradition, enabled it to develop a low-cost manufacturing base in Africa.

Steinhoff now consisted of two major businesses, Steinhoff Europe and Steinhoff Africa, each focusing on the manufacturing and sourcing of (predominantly) furniture and with a goal to control the manufacturing, supply and logistics activities of the business. According to Jooste, the following five years saw the company focusing on "establishing the base" and developing Steinhoff into a vertically integrated furniture and household goods business.

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"We have warehouses, we have distribution centres, we have logistics companies, we have retail stores, we have furniture production companies; we have the entire supply chain built up in all these countries." - (Angela Krüger-Steinhoff, member of the Supervisory Board of Steinhoff International)

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Company reports reveal that this was achieved by giving attention to four pillars:

a) Establishing a low-cost manufacturing base: This was largely achieved through the closure of most of the company’s manufacturing activities in Germany and their subsequent relocation to Poland and Hungary;

b) Entering the UK and Australian markets: The company acquired Relyon and Sprung Slumber in the UK and the Cornick and Freedom Groups in Australia;

c) Making inroads into the fields of logistics and raw material supply: The company acquired Unitrans Limited (to bolster its logistics capabilities) and a particle board manufacturer, PG Bison. The company also developed a logistics hub in Leinefelde, Germany;

d) Establishing sourcing operations in Asia: The company opened a sourcing office in Shenzhen, China.

These investment efforts enabled Steinhoff to reach its goal of achieving a 50/50 split between its own manufactured products and wholesale distribution. The company had 87 factories and 26 distribution and sourcing locations, and operated in 10 countries. It was now a fully vertically integrated furniture and household goods business with activities straddling manufacturing, sourcing and logistics. However, its retail operations were limited.

What then followed, according to Jooste, was a period of continued development and exponential growth at an international level. The company had developed a secure base of manufacturing and sourcing, but the continuation of a vertical integration strategy required the development of retail activities across all the businesses in the group to fully control every aspect of the supply chain. This, said Jooste, was the era of "consolidation". It was during this period that the company embarked on a breath-taking acquisition drive.

The consolidation strategy was implemented on three fronts:

a) UK and Asia Pacific: The company acquired retail operations in Australia and New Zealand (Freedom Group) and the UK (Homestyle). To bolster its worldwide sourcing operations, it also acquired Unitrans UK;

b) Europe: The company continued making investments with a view to expanding its retail footprint and acquired Poco (2008) and Conforama (2011);

c) Africa: The company acquired the JD Group of retail companies.

It is through these "bolt-on" investments, as Hendrik Ferreira (executive director) refers to them, that Steinhoff managed to integrate retail into its low-cost supply chain. By 2013, the company had full control over the entire supply chain: sourcing, distribution, logistics and retail.

3. The last few years (2014 - 2017)

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"This new era means that Steinhoff had developed from a sourcing and manufacturing business to a global retail business – keeping its brands local." - (2016 Steinhoff annual report)

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For many, Steinhoff International was the epitome of a successful, global retail business. In its short 50-odd-year history it was able to make the transition from a small-time furniture peddler, which sourced low-cost furniture from eastern Europe and sold it into West Germany, to a truly global retail giant, boasting a fully integrated supply chain covering sourcing, manufacturing, distribution, logistics and retail. This was the result of decades of conscious decisions to expand, diversify and vertically integrate the business.

• READ: Steinhoff: Built in five decades, cratered in two days

Steinhoff operates in the following business categories:

a) Decoration

b) Furniture

c) Consumer electronics and cellular

d) Kitchen, bathroom and quick-fix essentials

e) Kitchens and appliances

f) Clothing and footwear

g) Beds and mattresses

Its brands have become truly global:

· UK:

– Harveys (household goods)

– Bensons for Beds (household goods)

– Poundland (general merchandise)

– Pep & Co. (general merchandise)

– GHM! (general merchandise)

· Europe:

– Poco (household goods)

– Conforama (household goods)

– kika-Leiner (household goods)

– Pepco (general merchandise)

· Africa:

– PEP (general merchandise)

– Ackermans (general merchandise)

– Russells (household goods)

– Incredible Connection (household goods)

– Unitrans (auto)

· Australia and New Zealand:

– Freedom (household goods)

– Best & Less (general merchandise)

– Harris Scarfe (general merchandise)

– Snooze (household goods)

While Steinhoff has its headquarters in South Africa, it is registered in Amsterdam in the Netherlands with the majority of the company’s operations situated in Europe. Its integrated retail business is spread across the following regions under brands such as:

EU: Conforma, Poco, Abra, Lipo, Emmezeta

UK: Harveys, Bensons for Beds, Cargo

Asia Pacific: Freedom, Snooze, Poco

Africa: JD furniture brands, Poco, Incredible Connection, Hi-Fi Corporation, Pennypinchers, Timbercity, Hardware Warehouse, The Tile House

As an integrated manufacturing, sourcing and logistics giant, Steinhoff has a number of companies in its fold, including: Quattro Mobili, H&H, Abra, Lipo, Emmezeta, Bensons for Beds, Poco, Harveys, Conforama, Snooze, Xooon, Freedom and kika-Leiner.

One of Steinhoff’s most recent and largest acquisitions was that of Pepkor from Christo Wiese for roughly R60bn (R15bn in cash and the remainder in the form of 839 million shares), making Wiese one of Steinhoff’s largest shareholders. The Pepkor acquisition served not only to accelerate the growth of the company across Europe (in view of the complementary discount retail footprint of the two giants) but also to ensure the profitable transfer of the Pepkor business model into the current Steinhoff network. This has resulted in lower supply chain costs in eastern Europe, Australia and Africa through economies of scale.

In 2015 Steinhoff acquired the kika-Leiner Group and in July 2016 entered into a 50/50 joint venture with Cofel and acquired Poundland. Indirectly, in 2016, Pepkor also acquired GHM! and Tekkie Town. Yet the most significant deal concluded by the company has been the merger with Mattress Firm in the US. This merger has created the world’s largest multi-brand mattress retail distribution network and afforded Steinhoff entry into the coveted US market.

At its peak, Steinhoff was part of the JSE Top 40 index, the JSE Top 25 Industrial index and the JSE Socially Responsible Investment (SRI) index. In 2015, the company added to its financial credentials by securing a listing on the Frankfurt Stock Exchange (FSE).

Despite its global acclaim, the business has always remained true to its original goal: To manufacture and source furniture and homeware from low-cost countries and to sell these products to value-conscious consumers, especially in developed economies. It has done this by making use of a decentralised management structure and gaining control of costs throughout the supply chain, including manufacturing, sourcing, logistics and retail. At the height of its success, Steinhoff could proudly reflect on the fact that it provided everyday products at affordable prices, catering to customers’ need for variety and convenience. As a result, the company has often been referred to as the "IKEA of Africa".

By 2016, according to the Steinhoff annual report for that year, Steinhoff was selling household goods and general merchandise, straddling more than 40 different brands, in more than 32 countries across four continents. Globally it had 26 manufacturing facilities, 2 500 000 m² of warehouse space, 12 000 retail outlets covering 9 000 000 m² of retail space and a 4 000 000 m² property portfolio. It was also shipping 150 000 containers annually and employed 130 000 people. The annual report also revealed that in 2016 the company posted revenue of €8 645m and a net profit of €1 510m, representing a year-on-year growth rate of 11.8%. On 23 May 2017 its share price on the JSE was valued at R50.25, equating to a market capitalisation of R240.5bn.

However, the empire came tumbling down on the evening of 5 December 2017 when the Steinhoff CEO, Markus Jooste, announced that he would step down from his position "with immediate effect" and the Steinhoff board announced that the company had become aware of "accounting irregularities requiring further investigation". The company appointed PricewaterhouseCoopers to conduct an independent investigation into the alleged irregularities which had originally been identified by Deloitte. These irregularities related to off-balance sheet items and possible misrepresentations of earnings, although the extent and details of exactly what was meant by "irregularities" have yet to be determined.

Over the last few years, suspicions have been aroused by the dizzying pace of Steinhoff’s acquisition drive. What have concerned many observers are the high levels of complexity associated with these acquisitions and the ability of the company to acquire ailing businesses and (nearly instantaneously) show improved results once these businesses have been incorporated into the group.

Soon after Jooste’s resignation, when the implications of the reported "accounting irregularities" at Steinhoff started to sink in, Sygnia Group CEO, Magda Wierzycka, said: "When I looked at the financials … it took me exactly half an hour to figure out that the structure was obfuscated, that financial items made no sense, that the acquisition spree was not underpinned by any logic and was too frenzied to be well thought out, and that debt levels were out of control."

Currently, the company faces investigations or legal action instituted by numerous bodies and authorities, including the Johannesburg Stock Exchange (JSE), the Financial Services Board (FSB), the Department of Trade and Industry (DTI), and the Companies and Intellectual Property Commission (CIPC). The company is also facing two different class action lawsuits in Germany and the Netherlands. Furthermore, executives of the company have been brought before Parliament’s oversight committee on finance and its Standing Committee on Public Accounts (Scopa).

• READ: A quick guide to who's probing Steinhoff

The repercussions of the December 2017 announcements, including the launch of various probes into Steinhoff’s financial affairs, have been catastrophic for the company. According to media reports, in the days that followed the dropping of the initial bombshell, the company’s share price fell by 85% - and by 11 May 2018 it was sitting at a measly R1.60.

At the time of writing, many new developments – including the instituting of substantial financial claims against the company – were being reported. Whether Steinhoff will survive in its current or an altered form – or at all – remains to be seen.

Timeline of acquisitions

> 1998

Steinhoff Africa acquired:

· Roadturn

· Unity Longhauls

· Roadway Transport

Listed on the JSE

> 1999

Acquired factories from Klose Group

Acquired:

· Braecroft Timbers

· Megacor Holdings

· Cornick Group (including the Afcol assets)

Took over the management of Panda Sofa (Australia)

> 2000

Acquired Klose in Hungary

Steinhoff Poland acquired Prudnik

Acquired a strategic shareholding in Unitrans

> 2001

Made an offer to acquire Relyon Group (UK), including the brands of:

· Norma

· Pritex

Acquired:

· Marshall Furniture (Australia) and the Freedom Group (Australia and New Zealand) – thus forming Steinhoff Pacific

· the assets of Thesen (timber in South Africa)

· Woodline Timber Industries

· Egoform

> 2002

Acquired Dieter Knoll

Entered into a joint venture with La-Z-Boy (in US)

Acquired an interest in PG Bison Holdings

Increased its interest in Unitrans

> 2003

Acquired:

· Sprung Slumber (UK)

· an interest in Puris Bad GmbH

Privatised and publicly listed the Freedom Group

> 2004

Acquired:

· the remaining interest in PG Bison

· the assets of Hukla Möbelwerke

Expanded its interest in Unitrans

> 2005

Acquired a controlling interest in Homestyle, including the following brands:

· Bensons for Beds

· Sleepmasters

· Bed Shed

· Harveys

Acquired an interest in:

· AMAP

· KAP Industrial

Acquired a controlling stake in Unitrans

> 2007

Acquired:

· the remaining interest in Homestyle and delisted from the London Stock Exchange

· the remaining interest in Unitrans

· BCM business from Daun & Cie

> 2008

Established Hemisphere International Properties and ERM division

Acquired Woodchemicals South Africa

> 2010

Acquired the remaining interest in Hemisphere International Properties BV

> 2011

Acquired Conforama Holdings

Gained an interest in JD Group, including the Abra brand

Entered into an agreement to gain an interest in KAP (in exchange for a PG Bison and Unitrans interest)

> 2012

Acquired an interest in PSG

> 2013

Acquired:

· Slumberland

· Myers

· Dunlopillo

· Staples

> 2014

Acquired kika-Leiner (through Genesis)

Through Conforama, acquired assets from Fly, Atlas and Crozatier

Increased its interest in:

· JD Group

· KAP

> 2015

Acquired Pepkor Group

Through Pepkor Group, launched the Pep & Co. brand in the UK

Commenced an inward listing on the JSE and listed on the Frankfurt Stock Exchange (FSE)

Increased its interest in PSG

Acquired the remaining interest in the JD Group

> 2016

Entered into a 50/50 joint venture with Cofel Group

Through Pepkor, acquired GHM! and Tekkie Town

Acquired:

· Iliad, including the Buco brand

· Poundland

· Fantastic Holdings Group (Australia)

Announced a possible merger with Mattress Firm (US), which was successfully completed soon afterwards

*This list (drawn from Steinhoff annual reports) is for illustrative purposes only and does not include the acquisition of all brands controlled by Steinhoff International.

Events before and after the Steinhoff share price collapse

26 November 2015

GERMAN AUTHORITIES RAID STEINHOFF EUROPE GROUP SERVICES OFFICES

Steinhoff confirms that the Westerstede offices of Steinhoff Europe Group Services (SEGS) were searched by authorities relating to a review of balance sheet items.

4 December 2015

CONFIRMATION OF DISPUTE WITH PARTNERS

Steinhoff announces that these authorities found no evidence of any contravention of any provision of German commercial law.

23 August 2017

MANAGER-MAGAZIN IMPLICATES JOOSTE

Manager-Magazin reports that Markus Jooste was among employees under investigation by German prosecutors in relation to accounting fraud (in 2015).

24 August 2017

STEINHOFF DENIES CLAIMS MADE

Steinhoff denies the Manager-Magazin claims as "wrong or misleading".

18 – 21 September 2017

JOINT VENTURE PARTNERS LODGE CASE

In a dispute about Steinhoff accounts of 2016 with a former JV partner, OM Handels GmbH and MW Handels (owned by the former JV partner), Steinhoff receives a petition for an annual accounts proceeding before the Enterprise Chamber of the Amsterdam Court of Appeal.

5 December 2017

DELAY IN RELEASE OF FINANCIAL STATEMENTS

Steinhoff announces a delay in the release of audited results due to pending further investigations.

6 December 2017

CEO RESIGNS/BOARD APPOINTS PRICEWATERHOUSECOOPERS TO CONDUCT INDEPENDENT PROBE

Steinhoff announces the resignation of Markus Jooste (CEO) and that PricewaterhouseCoopers has been appointed to investigate possible "accounting irregularities".

Christo Wiese is appointed as Executive Chairman by the Supervisory Board and Pieter Erasmus in an executive advisory capacity.

6 December 2017

GERMANS CONTINUE PROBE

German authorities confirm that they are still continuing their investigation into "four current and former managers of a group" for accounting fraud.

7 December 2017

SHARES CONTINUE TO TRADE ON JSE AND FSE

To boost liquidity by €1 billion, Steinhoff releases non-core assets and refinances its long-term liabilities.

Ben La Grange continues his role as CFO as no evidence is found against him.

Moody’s downgrades Steinhoff to B1/Watch on the Global Scale and Baa3 on the SA National Scale.

9 – 11 December 2017

BOARD SUB-COMMITTEE ESTABLISHED TO BOLSTER GOVERNANCE

The company establishes a board sub-committee to improve independent governance: The board consists of Dr Johan van Zyl, Dr Steve Booysen and Heather Sonn.

9 – 11 December 2017

MEETING TO BE HELD WITH LENDERS

A meeting with creditors (including US and European banks) is scheduled for 11 December to discuss a revolving credit facility of €2.9 billion and a syndicated financing facility of $4 billion (to fund the acquisition of Mattress Firm).

9 – 11 December 2017

MEETING WITH LENDERS POSTPONED TO 19 DECEMBER

The meeting with creditors is delayed by a week to 19 December because full-year earnings are not yet available.

11 December 2017

WIESE ATTEMPTS NEGOTIATING A STANDSTILL ON LOANS

Wiese attempts to stabilise the company (rumoured to owe creditors as much as $21 billion) by negotiating a standstill agreement on a €5 billon margin loan.

12 December 2017

ADVISORS BROUGHT IN

Moelis & Company are appointed as independent financial advisors and AlixPartners as operational advisors.

JSE announces an investigation into whether or not Steinhoff has breached JSE listing requirements.

12 December 2017

THREE BIGGEST LENDERS GRANT EXTENSIONS

The company gains support from three major creditors in the form of extensions on a revolving credit facility of €1bn. Some suppliers of credit include Bank of America, BNP Paribas, China Construction Bank, Citigroup, Commerzbank, Credit Agricole, HSBC Holdings, Mizuho Financial Group, Natixis and Royal Bank of Scotland.

13 December 2017

LAW FIRM APPOINTED AND LENDERS APPROACH LAW FIRM

Company bondholders enter talks with Kirkland & Ellis and Hogan Lovells regarding their rights.

Steinhoff appoints law firm Linklaters as its advisor.

14 December 2017

WIESE QUITS BOARD

Steinhoff confirms misstatement of balance sheet assets (Steinhoff Europe) and confirms that 2016 results must be restated.

Christo Wiese resigns from the board, citing a conflict of interest.

19 December 2017

ACTING CEO ANNOUNCED/NEW SUPERVISORY BOARD ANNOUNCED/BOARD CHANGES

Steinhoff makes the following appointments: Heather Sonn (acting Chair), Daniel van der Merwe (former COO) as acting CEO, Alexandre Nodale (acting Group Deputy CEO) continues as CEO of Conforama) and Louis du Preez as Group Commercial Director.

19 December 2017

CIVIL LITIGATION PENDING IN THREE COUNTRIES

Steinhoff charged in civil suits by Andreas Seifert (OM Handels) in Germany, the Netherlands and Austria.

20 December 2017

STEINHOFF SEEKS LEGAL ADVICE AND ENTERS TALKS WITH LENDERS

Lending groups appoint legal advisors (Allen & Overy for Steinhoff Europe and Clifford Chance for South Africa).

Bondholders and Schuldschein lenders are invited by One Square Advisory Services (restructuring specialists) to a teleconference to discuss their rights and interests.

20 December 2017

TILP (GERMAN) CLASS ACTION LAWSUIT FILED

A lawsuit is filed by TILP in Frankfurt, representing investors.

27 December 2017

MATTRESS FIRM SECURES FUNDING

Mattress Firm (US subsidiary) secures a $225m ABL facility to allow daily trading by sole bookrunner Barclays.

28 December 2017

MOODY’S DOWNGRADES TO CAA1

Moody’s downgrades Steinhoff to a Caa1 corporate family rating and withdraws it from the National Scale Ratings.

28 December 2017

STEINHOFF ASIA PACIFIC APPOINTS OWN BOARD

In an attempt to distance itself from its ailing parent company, Steinhoff Asia Pacific appoints its own board (it does not share any banking facilities or cross-guarantee/cross-default clauses with Steinhoff).

2 January 2018

2016 and 2017 FINANCIAL STATEMENTS RESTATED

The company announces that the review of accounting irregularities is "progressing" and that 2015 and 2016 consolidated results will be restated.

4 January 2018

BOARD CHANGES

The company announces further board changes: Ben La Grange (CFO) steps down and Daniel van der Merwe is appointed acting CEO. Nominations are received for Alexandre Nodale (Deputy CEO), Louis du Preez (Commercial), Philip Dieperink (new CFO pending formal appointment to the Management Board of the company), Intended (Chief Restructuring Officer) and Johan Geldenhuys (Head of Treasury).

4 January 2018

FURTHER FUNDS ACQUIRED

Steinhoff Europe Retail secures a £180m two-year loan from hedge fund Davidson Kempner (to cover costs of daily operations).

8 January 2018

CONFORAMA SEEKS FUNDS/STEINHOFF FUNDING CONCERNS DEEPEN

To reduce its exposure to the Group, Conforama seeks finance and appoints Rothschild to assist.

The European Central Bank offloads Steinhoff bonds (estimated at €100m).

Steinhoff enters discussions with lenders to fund its European companies at subsidiary level.

15 January 2018

STEINHOFF SELLS ASSETS AT A LOSS

To gain access to funds, Conforama offloads Showroomprivé at about half its estimated value to Carrefour.

25 January 2018

PSA WANTS TO JOIN CLASS ACTION IN SA

The Public Servants Association (PSA), a South African trade union, approaches the Public Investment Corporation (PIC) to join a class action lawsuit.

25 January 2018

LA GRANGE RESIGNS FROM STEINHOFF AFRICA RETAIL BOARD

Ben la Grange (former CFO) resigns as non-executive director of Steinhoff Africa Retail.

2 February 2018

RESIGNATION OF DIRECTORS AND SUPERVISORY BOARD CHANGE

Steinhoff announces the following board resignations: Mariza Nel, Stephanus Johannes Grobler and Thierry Guilbert.

5 February 2018

VEB NOTIFIES STEINHOFF OVER CLASS ACTION

The Dutch Vereniging van Effectenbezitters (VEB) files a lawsuit against the company, stating that it published "inaccurate and misleading information".

6 February 2018

STEINHOFF SEEKS BONDS WAIVERS

The company seeks waivers from debt holders at a value of €2.68 billion.

6 February 2018

HAWKS MEET STEINHOFF/NO CHARGES AGAINST JOOSTE

The Hawks meet with Steinhoff to discuss possible fraud at the company, but do not lay charges against Jooste.

15 February 2018

CRO APPOINTED

The company appoints Richard Heis to the board as Chief Restructuring Officer.

20 February 2018

JOINT VENTURE CASE WON BY PARTNER

The Amsterdam Enterprise Chamber rules that Conforama, Mattress Firm and Pep Clothing in Africa should adjust their annual accounts.

28 February 2018

REVENUES FALL (UNAUDITED)

A trading update by the company indicates that revenues for 2018Q1 decreased by 5%.

28 February 2018

CHANGES TO SUPERVISORY BOARD

The following (independent) nominations to the Supervisory Board are made: Khanyisile Kweyama, Moira Moses, Hugo Nelson, Clive Thomson, Peter Wakkie and Alexandra Watson.

1 March 2018

MISREPRESENTATION MAY DATE BACK TO 2014

Emails are uncovered indicating that Markus Jooste was in contact about misrepresenting accounts (2014) with German Steinhoff managers.

7 March 2018

KONAR RESIGNS

Deenadaylen Konar resigns from the board.

23 March 2018

STEINHOFF WANTS TO PAY DIRECTORS MORE

Steinhoff proposes once-off payments of between €100 000 and €200 000 to three of its board members for undue time and effort commitments.

4 April 2018

VALUE OF EUROPEAN PROPERTY PORTFOLIO SLASHED

The company announces that the true value of the real estate portfolio of Hemisphere International Properties was "approximately €1.1 billion" (about half its previous estimate).

5 April 2018

STEINHOFF SCRAPS EXTRA PAY FOR DIRECTORS/RETAINS DELOITTE

The company does an about-turn on its remuneration proposal to board members.

20 April 2018

AGM OF SHAREHOLDERS OF STEINHOFF INTERNATIONAL HOLDINGS N.V.

At the AGM the Supervisory Board appoints five new members: Khanyisile Kweyama, Moira Moses, Hugo Nelson, Peter Wakkie and Alexandra Watson and retains Stefanes Booysen, Angela Krüger-Steinhoff and Heather Sonn. Johan van Zyl resigns from the Supervisory Board, indicating: "I have thus completed my assignment on the board and fulfilled my commitment to major shareholders of the company".

The Management Board appoints Philip Dieperink (Chief Financial Officer), Theodore de Klerk (Operational Director), Alexandre Nodale (Deputy Chief Executive Officer) and Louis du Preez (Commercial Director).

Deloitte Accountants B.V. is reappointed as external auditor for the financial year 2018.

Acting Chairperson of Steinhoff Supervisory Board, Heather Sonn, acknowledges "accounting irregularities" and the company's priorities to finalise a restructuring plan and the 2017 audit.

"We want to uncover the truth, show the world what has happened, prosecute any wrongdoing and reinstate trust in the company," Sonn said.

The company confirms that the PricewaterhouseCoopers (PwC) forensic probe into Steinhoff has uncovered a pattern of transactions stretching over a number of years which led to the material overstatement of the income and asset values of the group.

* Part Two to follow.