Steinhoff on the brink – Moneyweb


This is a tense weekend for Christo Wiese, chairman of Steinhoff International. Lying in his vacation home in the port city of Yzerfontein, near Cape Town, he barely called.

The 77-year-old billionaire sold his clothing store chain to Steinhoff, making him the largest shareholder. Now a problem is happening. The auditor at Deloitte refused to sign the annual account and a few days earlier asked Wiese if he knew that CEO Markus Jooste had been overseeing fraud for years in the business.

However, Wiese hopes that disasters can be avoided for French furniture retailers, Conforama, Poundland and Mattress Firms in the UK. Jooste will return from Germany on Monday morning, December 4, 2017, bringing the promised documents will alleviate worries. But the revelation over the next 48 hours will leave the global retail giant on the verge of collapse, removing some $ 13.7 billion from market value and tarnishing the image of South African business.

Nearly a year passed, the PwC auditor's long-awaited inquiry into Steinhoff's books was almost complete, promising deeper insight into what had happened and who was responsible. Formal accusations can follow against anyone involved in a mistake, according to the South African police unit known as the Hawks. The story of the impending destruction is based on several months of interviews with people involved in the event asking for anonymity to discuss personal matters, as well as testimonies given at the South African parliamentary session.

Near the first Monday morning in December, Wiese has traveled 90 minutes from Yzerfontein to Steinhoff's luxury headquarters in Stellenbosch, a rich city located between vineyards. There he met Steve Booysen, head of the Steinhoff audit committee, and representatives from Deloitte and PwC.

When they waited for Jooste to arrive, the first shock wave from the coming earthquake began to ripen out. The company announced that it will issue annual revenues on Wednesday, on schedule, but with an important warning: the results will not be audited. At lunchtime, Steinhoff's shares fell by 10%.

A few minutes after the statement was published, Wiese saw that he had a voicemail from Jooste. The CEO had just landed and returned home to take a shower, and asked the auditor for a line at 11 am because he had the evidence requested. Dirk Schreiber, head of German finance and Steinhoff in Europe, will join him.

Shortly before 10am, it was Booysen's turn to hear from Jooste. He hasn't been on a trip and is taking legal advice, the CEO said in a text message – which in Booysen's mind showed that the account did cover financial errors. Sure enough, when the meeting arrived, Jooste did not appear.

Neither Jooste nor his lawyer responded to requests for comment.

Ben La Grange's chief financial officer joined in an increasingly anxious horror that afternoon after presenting the audited results for Steinhoff's African-shortcut unit, which he led as CEO. He had been called to a meeting in the office over the weekend and showed Deloitte's accusations of fraud. He said he should wait for Jooste to explain things.

Around 5 pm, Wiese gets a call from a legal counsel asking if he is in Steinhoff's office and can receive visitors. Upon his arrival, the lawyer said Jooste was on his farm and was in a bad condition. He refuses to meet Wiese face to face and offers his resignation. That's when billionaires realize that their worst fears will come true.

Earlier on Monday, Jooste had called La Grange and asked him to bring two other executives, Danie van der Merwe and Stehan Grobler, to meet him at Lanzerac, a winery, hotel and spa near his house previously owned by Wiese. Around 8pm, at the break from the audit committee meeting, they obeyed. Jooste looked shaken. He reaffirms his plan to stop, but urges them to stay and promises to help solve everything.

Back at the office, the audit committee continued the meeting until around 11pm. At that time, Schreiber, who arrived on his own the previous day, made an amazing disclosure that the entry of cash in the company's account was incorrect and that the balance was exaggerated.

The next morning, Bruno Steinhoff and his daughter Angela arrived at Cape Town International Airport to attend the pre-results board meeting. Bruno, who founded the company in the 1960s, no longer had an operational role, but he and Angela each sat on the board and held bets. Bruno had just seen Jooste at his 80th birthday party in Germany that weekend, and didn't know what he would hear. With fear, Wiese meets them in the office and tells them what happened. His warning that the value of their shares could be abolished, Angela Kruger-Steinhoff seemed shaken.

Usually, board meetings held before the release of annual results are live when members debate dividends and plan for next year. This time, when director Heather Sonn arrived, she looked around the meeting room and asked what was happening and said it looked like a funeral.

Wiese starts the meeting on Tuesday by bringing the board up, then asks if they should accept Jooste's offer of resignation or ask him to settle the mess. The consensus is that Jooste must be asked to enter. Around 11 o'clock in the morning, Wiese called him.

Jooste and his lawyers in Cape Town and received the call. Wiese tells her that whatever she does is done, but she can still try to save the company and come to help resolve the chaos. Jooste replied that he would be there in two to three hours. But again he failed to show, and the call was the last time the two men spoke.

The council began preparing to announce that Steinhoff had appointed PwC to conduct a forensic audit and queue for lawyers and directors to stabilize the ship. Around 5 pm, a director got a text message that was forwarded to him which apparently was written by Jooste, saying that he had made a big mistake and while he had never intended to harm anyone, it was time for him to move. in. Concerns that the word leaked increased their urgency to publish the statement.

At 9:44, in Germany, the company announced an investigation into accounting irregularities and the resignation of Jooste. Stocks fell 62% in Johannesburg in early trade. Wiese resigned 10 days later, was replaced as Sonn's non-executive chairman, director Steinhoff and daughter of the former South African ambassador to the United States. Earlier this year, he likened retailers to being fought with burning buildings.

In the nearly 12 months since the crisis began, Steinhoff has sold assets, froze executives, declared the Mattress Company bankrupt, closed stores and delayed delays in payments with bondholders and lenders – all while being investigated by regulators. Meanwhile, lawsuits have accumulated in three countries, including R59 billion claims by former Wiese chairman.

© 2018 Bloomberg L.P


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