LDN - Business

Steinhoff scandal knocks $12 billion off value in blow to tycoon Wiese

[December 07, 2017]

By Tiisetso Motsoeneng and Victoria Bryan

JOHANNESBURG/BERLIN (Reuters) - Shocked Steinhoff shareholders have wiped more than $12 billion off its value since it revealed "accounting irregularities" and parted ways with its chief executive, in a dramatic fall from grace for the South African retailer.

Once a must-have for investors who backed its reinvention as an international retail empire including brands such as Mattress Firm and Poundland under veteran CEO Marcus Jooste, Steinhoff <SHFFp.J> <SNHG.DE> shares fell by a third on Thursday, compounding the previous day's more than 60 percent fall.

This collapse also leaves South African tycoon Christo Wiese, Steinhoff biggest shareholder and chairman, seriously out of pocket, eroding more about $2.8 billion of his net worth.

"One of the reasons we owned Steinhoff was because of the management's ability in sweating their assets. That has now changed, management has turned out to be a liability," said Michael Treherne, a fund manager at Vestact in Johannesburg.

By late afternoon, the stock had fallen 31 percent in Johannesburg, and was down about 34 percent in Frankfurt where it has had its primary listing since 2015.

Steinhoff has put 76-year-old Wiese, one of the most respected business leaders in South Africa, in charge for now and called in PwC to investigate the accounting problems.

Wiese, who describes himself as a "realist, pragmatist", started his budget clothing retailer Pepkor in the 1960s, in Upington on the southern edges of the Kalahari desert.

He studied law in Stellenbosch, a close-knit town dominated by Afrikaans-speaking whites, but now lives in Clifton, an affluent area of Cape Town overlooking the Atlantic Ocean and is best known for transforming budget grocer Shoprite <SHPJ.J> from just six shops in the 1970s to hundreds of stores across Africa.

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South African magnate Christo Wiese, Steinhoff's largest shareholder and chairman, listens during an interview in Cape Town, South Africa, September 27, 2016. REUTERS/Mike Hutchings/File Photo

SHOPPING SPREE

Wiese and Jooste were instrumental in reinventing Steinhoff, turning it from a modest distributor of furniture made in communist era eastern Europe to a global household goods retailer, vying for market share with the likes of IKEA.

Steinhoff has been on shopping spree since 2011 when it took over French furniture retailer Conforama. Last year's string of acquisitions included Mattress Firm and Poundland, thrusting it firmly on to investors' radar screens.

"Whether Steinhoff's zealous expansion tactics amount to a winning or losing strategy really does depend on the outcome of the investigation," said Erika Sirimanne, Head of Home and Garden Research, Euromonitor International.

Steinhoff has been under investigation for suspected accounting irregularities by the state prosecutor in Oldenburg, Germany since 2015.

Four current and former managers are under suspicion of having overstated revenues at subsidiaries, German prosecutors said this week.

Steinhoff has previously said that move related to whether revenues were booked properly, and whether taxable profit was correctly declared.

(Reporting by Tiisetso Motsoeneng and Victoria Bryan; Editing by Susan Fenton/Keith Weir/Alexander Smith)

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