Wiese Rebuts Wrongdoing Allegation Over Steinhoff Payments

JOHANNESBRUG (Capital Markets in Africa) – South African billionaire Christo Wiese denied he did anything wrong when receiving payments from Steinhoff International Holdings NV while he was chairman.

The 325 million euros ($402 million) he received related to a planned merger between Steinhoff’s African operations and South African supermarket chain Shoprite Holdings Ltd., in which Wiese is the biggest shareholder, he said by phone. They were cleared by the central bank, and he started returning the cash when the deal collapsed following the accounting scandal that engulfed Steinhoff in December.

Steinhoff, which has since lost 95 percent of its value, said Tuesday that two payments made to Wiese in October and November didn’t follow correct disclosure or governance procedures. That dragged the billionaire deeper into a crisis that ended the career of former Chief Executive OfficerMarkus Jooste, who quit when financial irregularities were first reported.

“Given the parties involved from Steinhoff’s side, I accepted that the requisite internal approvals and governance matters in respect of the sale agreement and payments thereunder were complied with,” Wiese said.

Forward Sell
To facilitate the merger of Shoprite and Steinhoff Africa Retail Ltd., known as STAR, Wiese was to swap a 25.5 billion rand ($2.1 billion) stake in Shoprite for shares in STAR. Given the amount of time it would take to gain regulatory approval for the combination, Wiese said he agreed to forward sell STAR shares to Steinhoff to boost cash reserves and reduce his debt.

Payments of 200 million euros and 125 million euros “were made in terms of a commercial and legally binding sale agreement,” Wiese said. “In the normal course of events, I would simply have received my STAR shares and transferred them to Steinhoff.”

Wiese, who quit Steinhoff in mid-December, became its largest investor in 2015 when he sold his pan-African clothing retailer Pepkor to the company. He told lawmakers in late January that news of the irregularities came as a “bolt from the blue” and that he had no prior knowledge of any wrongdoing.

“There have been lots of governance lapses at Steinhoff, both from the executive and non-executive boards, and this may be an example of another,” said Asief Mohamed, chief investment officer at Aeon Investment Management in Cape Town. “It doesn’t appear this followed due process on what is a material related-party transaction.”

Shares Decline
Steinhoff shares fell 9.2 percent by 2:27 p.m. in Frankfurt on Wednesday, extending a 15 percent drop the previous day. The owner of Conforama in France and Mattress Firm said Tuesday evening it had no further comment.

Steinhoff has hired auditors at PwC to investigate its accounts and is also being probed by a range of regulators and law authorities around the world. The Federation of Unions of South Africa plans to attend Steinhoff’s annual general meeting on April 20 to push for a new board, it said in an emailed statement.

The way the company handled disclosure of the payment “has created additional uncertainty,” said Theo Botha, a shareholder activist. “These were the leaders of Steinhoff. Where is the transparency from the board of directors?”

Source: Bloomberg Business News