Steinhoff sells loss-making Austrian unit to Rene Benko's Signa

Steinhoff International [JSE:SNH] agreed to sell its Austrian furniture retailer Rudolf Leiner GmbH and real estate assets to billionaire Rene Benko’s Signa to prevent a looming insolvency of the unit.

The conditional offer could plug a cash-draining hole for Steinhoff, which has been trying to restructure the unprofitable Austrian business, also known as Kika/Leiner, amid fierce competition from bigger rival XXXLutz and Sweden’s Ikea.

Kika/Leiner’s fate has hung in the balance since credit insurers withdrew guarantees for its suppliers earlier this month.

"The Kika/Leiner business is currently loss-making and placed significant cash demands on the wider group," Steinhoff said in a statement. "Any turnaround plan would have required significant new investment from the group over a number of years."

With around 5 000 jobs at risk in a Kika/Leiner insolvency, the rescue was front page news in Austrian media. Even Austrian Chancellor Sebastian Kurz had a hand in bringing the deal together, he said in a statement Friday.

Since reporting financial irregularities late last year, Steinhoff has kept retail businesses around the world in operation even as its share price plunged more than 95% and liquidity dried up.

While most creditors this month agreed to a standstill agreement on the bulk of €9.6bn (R149bn) of debt, Kika/Leiner’s situation worsened.

Curbing spending

Kika/Leiner has 70 stores in Austria and other parts of Europe compared with Steinhoff’s total of 12 000. In a presentation to lenders last month, Steinhoff said it intended to turn around the Austrian retailer, focusing on curbing spending and cutting jobs.

No details on pricing or terms were provided by Steinhoff of Kika/Leiner. A Signa spokesman declined to comment. Austrian newspaper Die Presse had reported on Thursday that Benko was ready to pay about €450m (R6 976) for the properties, and €1 (R15.50) for the retail business.

The bid is subject to Signa’s "confirmatory due diligence" of the retail business until Tuesday, and Benko has the right to walk away from the property deal until the end of July. Closing is expected by the end of September.

Steinhoff shares gained 2.4% as of 9:20 in Johannesburg.

Property tycoon

Benko, a 41-year-old self-made billionaire who made his first million renovating apartments in his hometown Innsbruck, owns prime assets in Vienna and Germany, including Berlin’s famous KaDeWe department store and the "Golden Quarter" of luxury stores and hotels in Vienna’s inner city. He bought and restructured loss-making German department store chain Karstadt in recent years.

Steinhoff is battling to stay afloat while auditors at PwC investigate its finances with a view to publishing audited accounts by the end of the year. The crisis erupted in early December, when Deloitte refused to sign off on results for 2017 and CEO Markus Jooste quit.

Steinhoff’s retail chains include Conforama in France, Mattress Firm in the US, and Poundland in the UK.

Kika/Leiner is leasing 94 properties from Hemisphere International Properties, Steinhoff’s European real-estate portfolio. It’s not clear how many of them are part of the deal with Signa. Steinhoff said in April Hemisphere had been revalued at about €1.1bn (R17bn), half the previous book amount.

Steinhoff "remains in constructive discussions with its creditors to agree and implement a restructuring plan," the company said in a statement.

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