Behind Steinhoff's settlement offer looms the threat of liquidation

0:00
play article
Subscribers can listen to this article
(Getty)
(Getty)
  • Steinhoff is facing over 90 legal claims in South Africa, Germany and the Netherlands amounting to well over R100 billion stemming from the plunge in its share price.
  • The furniture conglomerate has proposed a "global settlement' with claimants which would  forestall what it says would be "protracted, expensive and unpredictable" court processes were each claim to be individually assessed.
  • Steinhoff has also said that, if no settlement can be reached, it may have to be liquidated which would be a "bad outcome" for all.

As Steinhoff moves forward with its plan to settle the host of lawsuits it is facing, it is hammering home to claimants that they would lose out if no agreement is reached and it is liquidated.

The Stellenbosch-headquartered furniture and household goods conglomerate is facing over 90 separate legal claims in South Africa, Germany and the Netherlands stemming from the precipitous drop in its share price in December 2017.

The claimants are broadly arguing that they would not have bought the retailer's shares at the price they did if they had known the true state of its finances. The conglomerate had to restate certain of its past financial results after a forensic probe found that a "small group" of former executives – including former CEO Markus Jooste - inflated its profit and asset values for years.

The group's shares have fallen by over 95% since the abrupt resignation of Jooste in December 2017 erased around R200 billion in shareholder value.

Last year, Steinhoff proposed what it termed a "global settlement" to settle these claims once and for all, without needing each separate claim to be argued induvial in court.

The group has proposed paying out about €900 million (roughly R16 billion) to settle all the claims it is facing. On Monday, its former auditor Deloitte agreed to pay €70 million (roughly R1.3 billion) in compensation to claimants. Steinhoff and Deloitte have both said that their offers would not constitute an admission of liability or wrongdoing.

While the sum that Steinhoff is offering litigants is far smaller than the roughly €10 billion it is facing in claims, it has argued that it is all it can realistically afford. The company - which is saddled with about €9 billion in debt, may have to be liquidated if no agreement is reached.

"Steinhoff’s firm position remains that liquidation would be a bad outcome for all stakeholders and would materially impair the value of assets available for distribution and likely diminish the amount of the claimants’ recoveries relative to the settlement," it said.

"This is why Steinhoff is urging all claimants to take this opportunity to agree a settlement by supporting the proposed schemes."

In addition, if claimants do not vote for the settlement to proceed, Steinhoff has warned they will face "protracted, expensive and unpredictable court processes," which would take years to wrap up.

For Simon Brown, founder and director of investment website JustOneLap.com, Steinhoff's argument needs to be taken seriously.

"The court cases will cost Steinhoff a fortune, which is money that can't be paid out. And if the claimants win they'll essentially bankrupt the remaining assets".

The company on Tuesday launched a central hub for claimants to file claims and receive updates at  https://steinhoffsettlement.com/

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
ZAR/USD
14.45
(+0.00)
ZAR/GBP
20.51
(-0.03)
ZAR/EUR
17.63
(+0.02)
ZAR/AUD
11.55
(+0.11)
ZAR/JPY
0.14
(+0.02)
Gold
1797.83
(-0.29)
Silver
28.08
(+0.55)
Platinum
1258.00
(-0.18)
Brent Crude
66.41
(+2.64)
Palladium
2423.05
(-0.22)
All Share
66200.76
(+0.42)
Top 40
60747.41
(+0.42)
Financial 15
12354.99
(+0.99)
Industrial 25
86550.38
(-0.10)
Resource 10
66735.02
(+0.89)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
Yes, and I've gotten it.
21% - 1008 votes
No, I did not.
52% - 2517 votes
My landlord refused
28% - 1346 votes
Vote