Wednesday , September 28 2022

Steinhoff on the verge – Moneyweb


It was a tense weekend for Christo Wiese, chairman of Steinhoff International. Hunkered down at his holiday home in the port of Yzerfontein, near Cape Town, he was barely out of his phone.

The 77-year-old billionaire had sold his chain of clothing stores to Steinhoff, making him the largest shareholder. Now it was difficult to brew. Auditors at Deloitte had refused to print on the annual report and earlier Wiese asked if he knew that CEO Markus Jooste had overseen years of fraud at the business.

Nevertheless, Wiese hoped disaster could be averted by the owner of the French furniture dealer Conforama, Britain's pound and mattress company in the United States. Jooste would return from Germany early on Monday, December 4, 2017, which would result in documents that he had promised to ease concerns. But revelations over the next 48 hours would leave the global retail war on the verge of collapse, wiping out about $ 13.7 billion of market value and damaging the image of South African operations.

For almost a year, a long-awaited probe in Steinhoff's books by auditors PwC approaches and promises deeper insight into what took place and who was responsible. Formal fees can be followed against all those involved in inaccuracies, according to the South African police unit called the hawks. This statement of transient degradation is based on many interviews for several months with individuals involved in the events requiring anonymity that discusses private issues as well as testimonies given at South African parliamentary hearings.

Early in the morning, the first Monday in December, Wiese had made a 90-minute journey from Yzerfontein to Steinhoff's plumbing district in Stellenbosch, a wealthy city nestled among vineyards. There he met Steve Booysen, the head of Steinhoff's Audit Committee, and representatives of both Deloitte and PwC.

While waiting for Jooste to come, the first shock waves in the transient earthquake began to ripple outward. The company announced that it would publish annual results on Wednesday, according to plan, but with an important approach: the results would be unrequited. At lunch, the Steinhoff shares had fallen by 10%.

Minutes after the statement was published, Wiese saw that he had a voicemail from Jooste. The CEO had just landed and went home to shower and asked for the auditors to be ready for a meeting at 11:00 because he had evidence that had been required. Dirk Schreiber, a German citizen and Steinhoff's CFO in Europe would join him.

Just before 10 o'clock it was Booysen's turn to hear from Jooste. He was not yet on his way and took legal advice, says CEO in a text message – which Booysen's mind suggested that the accounts actually masked financial errors. Certainly, when the meeting came, Jooste did not see.

Neither Jooste nor his lawyer responded to the request for comments.

Chief Financial Officer Ben La Grange joined the increasingly worrying afternoon after presenting the reviewed results for Steinhoff's relaxed African unit, which he led as CEO. He had been called for a meeting at the office this weekend and showed Deloitte allegations of fraud. He had said it was best to wait for Jooste to explain things.

At 5 o'clock Wiese recalls a call from a legal adviser asking if he was at Steinhoff's office and could receive a visitor. On arrival, the lawyer said that Jooste was on his farm and in poor condition. He refused to see Wiese face to face and offered his departure. That's when the billionaire realized that his worst fear was about to become reality.

Earlier on Monday, Jooste called La Grange and asked him to bring two other bosses, Danie van der Merwe and Stehan Grobler, to meet him at Lanzerac, a vineyard, hotel and spa near his home, formerly owned by Wiese. At 8:00 AM, during a break from the Audit Committee meeting, they followed. Jooste looked shaken. He repeated his plan to end, but urged them to continue and promised to help sort everything out.

Back at the office, the Audit Committee continued to meet at 11.00. At that time, Schreiber, who had come alone earlier in the day, made the amazing revelation that the input of cash in the company accounts was incorrect and the balance was excessive.

The next morning Bruno Steinhoff and his daughter Angela arrived at Cape Town International Airport for the planned meeting before the performance. Bruno, who founded the company in the 1960s, no longer had any operational role, but he and Angela sat on the board and held stakes. Bruno had just seen Jooste on his 80th birthday in Germany that weekend and had no idea what to hear. With a sense of fear, Wiese met them in the office and told them what had happened. His warning that the value of their shares could be wiped out left Angela Kruger-Steinhoff visibly shaken.

Typically, board meetings held prior to the publication of annual results were lively, as members discussed dividends and planned for the coming year. This time, when director Heather Sonn arrived, she looked around the boardroom and asked what had happened and said it looked like a funeral.

Wiese started the Tuesday meeting by bringing the board quickly and then asking if they would accept Jooste's offer of termination or ask him to sort out the shambles. The consensus was that Jooste would be asked to come in. At 11 o'clock Wiese called him.

Jooste was with his lawyers in Cape Town and took the call. Wiese told him that everything he had done had done, but he could still try to save the company and come in to help figure out the mess. Jooste replied that he would be there in two to three hours. But again it failed to show, and that was the last time the two men spoke.

The board began to prepare to announce that Steinhoff had appointed PwC to conduct a forensic investigation and to appoint lawyers and directors to clean the ship. At about 5 pm a director received a text message forwarded to him who appeared to have been written by Jooste and said he had made some big mistakes and while he never intended to hurt anyone, it was time for him to move. Worrying the word leaked increased their urgency to publish the statement.

At 9:44, in Germany, the company announced the investigation of irregularities in the report and Joostes departure. The stock fell 62% in Johannesburg at the start of trading. Wiese trampled 10 days later, replaced as non-executive chairman of Sonn, a Steinhoff director and daughter of a former South African ambassador in the United States. Earlier this year, she resembled the skilled dealer to a burning building.

Over the next 12 months since the crisis began, Steinhoff has sold assets, suspended managers, declared Madrass Firm bankrupt, closed stores and negotiated payment delays with bondholders and lenders – all under investigation by regulatory authorities. At the same time, trials have arisen over three countries, including a claim of R59 billion from former Wiese chairman.

© 2018 Bloomberg L.P

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