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Steinhoff has reached an agreement with its largest creditors, which could see them holding 80% of the company.
If shareholders agree to the deal, they would end up owning 20% of the company, with creditors entitled to the rest. The company will no longer be listed on any stock exchange.
The company has debt of €10 billion (R185 billion).
On Thursday, Steinhoff said that an agreement has been reached with creditors representing 64% of its total debt. They have agreed to extend the maturity of the group services debt from the current maturity date of 30 June 2023 to at least 30 June 2026.
Steinhoff said that if shareholders agreed to the "maturity extension transaction" they would retain 20% of the economic interest in the company with financial creditors being entitled to the balance. If they did not agree to it, shareholders will no longer have any interest in the group.
By late morning on Thursday, Steinhoff's share price lost 33% in reaction to the announcement, falling to 109c – from above 500c at the start of the year.
Protea Capital Management CEO Jean Pierre Verster said the announcement by Steinhoff made it clear that "time has run out for shareholders" and that control of the group will now transfer to the creditors of Steinhoff through this proposed transaction.
"For all practical purposes, Steinhoff should have been handed to its creditors long time ago," said Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management.
"They always had the final say in what happens to the business next and in all honesty, they’ve been acting very polite to keep the business running as it does. And here they are still being nice by offering 20% to existing shareholders. In my honest opinion, Steinhoff shareholders must simply vote against the transaction, hand over all their shares and move on. They are not going to get anything out."
Click here for Steinhoff's share price and other data
Steinhoff hoped to implement the transaction on or before June next year.
Steinhoff CEO Louis du Preez said the agreement would "ultimately be a very good deal for the group" taking into consideration the "economic and other challenges currently facing the group".
"The extension allows time for the group to realise the inherent value of its investments in a controlled manner. As such we are greatly encouraged by the progress made so far and we urge all stakeholders to support the finalisation and implementation of these proposals."
Wayne McCurrie said it was good news that Steinhoff was "planning to re-profile their debt which will give them more cashflow breathing room".
