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Steinhoff International is a
multinational holding company
A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
that is dual listed in
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
and
South Africa
South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
. Its holdings are in the
retail
Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...
sector, primarily in furniture and household goods, and include a
controlling stake
A controlling interest is an ownership interest in a corporation with enough voting stock shares to prevail in any stockholders' motion. A majority of voting shares (over 50%) is always a controlling interest. When a party holds less than the major ...
in South Africa's
Pepkor
Pepkor is a South African-based investment and holding company with business interests in Africa, Australia and Eastern Europe. It manages a portfolio of retail chains focused on the value market selling predominantly clothing, footwear and text ...
group. The company operates in Europe, Africa, Asia, the United States, Australia and New Zealand. It is well known for an
accounting scandal
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...
which led to criminal charges against its former chief executive,
Markus Jooste
Markus Johannes Jooste (born 22 January 1961) is a South African businessman and the former CEO of Steinhoff International. He is an avid horse breeder, and in 2016 was reported to be one of Africa's richest people, worth $400 million. Joining f ...
.
History
Steinhoff was founded in 1964 by
Bruno Steinhoff
Bruno Ewald Steinhoff (born November 1937) is a German billionaire businessman, the founder of Steinhoff International, a South African-based international retail holding company, and its executive chairman until September 2008. He is now a non-e ...
in
Westerstede, Germany. Bruno Steinhoff sourced furniture from
communist
Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, a s ...
countries in Europe, for resale in Western Europe.
In 1997, Steinhoff acquired 35 per cent of Gommagomma, a furniture company based in
South Africa
South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
, and prepared for a
merger
Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...
the following year. The company moved its headquarters to South Africa in 1998, attracted by the low
production costs
Cost of goods sold (COGS) is the carrying value of goods sold during a particular period.
Costs are associated with particular goods using one of the several formulas, including specific identification, first-in first-out (FIFO), or average cost. ...
, and
went public on the
Johannesburg Stock Exchange
JSE Limited (previously the JSE Securities Exchange and the Johannesburg Stock Exchange) is the largest stock exchange in Africa. It is located in Sandton, Johannesburg, South Africa, after it moved from downtown Johannesburg in 2000. In 2003 ...
that same year.
The merged group was headed by Bruno Steinhoff as
executive chairman and Markus Jooste as
managing director
A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especially ...
.
Expansion
In subsequent years, Steinhoff acquisitions included an
£86 million investment in the United Kingdom's Homestyle Group, in 2005; and, in 2011, a
$1.2 billion investment in French
Conforama
Conforama is Europe's second-largest home furnishings retail chain with over 200 stores in France, Spain, Switzerland, Portugal, Luxembourg, Italy, and Croatia.
History and ownership
In the early 1960s, Pierre and Guy Sordoillet, Jean Moll ...
, Europe's second largest
retailer
Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...
of home furnishings, with over 200 stores in France, Spain, Switzerland, Portugal, Luxembourg, Italy and Croatia; and, in 2013, the acquisition of Austrian home retailer Kika-Leiner.
In 2015, Steinhoff acquired
Pepkor
Pepkor is a South African-based investment and holding company with business interests in Africa, Australia and Eastern Europe. It manages a portfolio of retail chains focused on the value market selling predominantly clothing, footwear and text ...
, a South African investment and
holding company
A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...
focused on low-end retail; the $5.7 billion cash-and-share deal made
Christo Wiese
Christoffel F. Hendrik Wiese (born 10 September 1941) is a South African businessman and former billionaire. His source of wealth is consumer retail. Steinhoff's largest shareholder and chairman.
In December 2015, Steinhoff International moved its primary listing from the Johannesburg Stock Exchange to the
Frankfurt Stock Exchange
The Frankfurt Stock Exchange (german: link=no, Börse Frankfurt, former German name – FWB) is the world's 12th largest stock exchange by market capitalization. It has operations from 8:00 am to 10:00 pm ( German time).
Organisation
Locat ...
, and founded a new Dutch holding company, Steinhoff International Holdings NV, based in
Amsterdam
Amsterdam ( , , , lit. ''The Dam on the River Amstel'') is the Capital of the Netherlands, capital and Municipalities of the Netherlands, most populous city of the Netherlands, with The Hague being the seat of government. It has a population ...
.
This move reflected Steinhoff's shift from its traditional markets, in the
Indian Ocean
The Indian Ocean is the third-largest of the world's five oceanic divisions, covering or ~19.8% of the water on Earth's surface. It is bounded by Asia to the north, Africa to the west and Australia to the east. To the south it is bounded by th ...
basin, to the European market.
The management remained in South Africa. As of May 2020, Steinhoff International Holdings NV remained headquartered in Amsterdam.
In March 2016, Steinhoff is a member of
MDAX
The MDAX is a stock index which lists German companies trading on the Frankfurt Stock Exchange. The index is calculated by Deutsche Börse.
Until 2021 included the 60 Prime Standard shares from sectors that rank immediately below (in value of mar ...
with capitalization of over 20 billion Euros but has a low trading volume.
In July 2016, UK discount retail chain
Poundland
Poundland is a British variety store chain founded in 1990. It once sold most items at the single price of £1, including clearance items and proprietary brands. The first pilot store opened in December 1990 following numerous rejections by ...
accepted Steinhoff's takeover offer of £597 million which was then increased by Steinhoff to £610 million in August 2016. The takeover received shareholder approval in September 2016.
As of August 2016, Steinhoff held retailing activities in 30 countries, counting 6,500 retail outlets belonging to 40 different brands, and employing about 90,000 employees.
60 per cent of the company's revenue, and two-thirds of its benefits, are made in Europe.
In August 2016, Steinhoff announced its plan to purchase the United States-based
Mattress Firm
Mattress Firm Inc. is an American mattress store chain founded on July 4, 1986. The headquarters of the company is located in Houston, Texas.
Business
Before its bankruptcy in 2018, the company operated over 3,600 locations in 48 U.S. states. M ...
for $3.8 billion.
In February 2017, Steinhoff and South African retail giant
Shoprite called off a proposed merger.
In 2017, Mattress Firm split from its supplier
Tempur Sealy.
In October 2018, Mattress Firm filed for bankruptcy
but emerged from
Chapter 11
Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...
bankruptcy 2 months later after financial restructuring with support from
AlixPartners
AlixPartners is a financial advisory and global consulting firm best known for its work in the turnaround space.Merx, Katie. "Thinking Big Thoughts." ''Crain's Detroit Business'' 19.36 (2003): 18. ''Regional Business News.'' Web. 29 May 2013. J ...
.
Debt problems
More significantly, in the aftermath of a major accounting scandal in 2017–2019 , Steinhoff faced significant
debts
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The de ...
– $10 billion worth
– and possible further liabilities due to
civil claims against it, even as its creditors withdrew their credit facilities.
Among the casualties was a consortium of lenders, including Japanese bank
Nomura and a range of U.S. institutions, which had extended a $1.9 billion
margin loan to Steinhoff. Nomura confirmed that it had booked an unrealised loss of 14 billion
yen
The is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar (US$) and the euro. It is also widely used as a third reserve currency after the US dollar and the e ...
($128 million). In 2018, Steinhoff negotiated with its creditors a three-year reprieve on debt repayment.
On 25 April 2018, Extreme Digital, a Hungarian e commerce firm acquired by Steinhoff in October 2015, was resold to their founders Balázs Várkonyi and Gyula Kelemen through their buying back shares.
As of August 2019, Steinhoff creditors had received a 50 per cent stake in Conforama.
In September 2019, the company told its
shareholders
A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal ow ...
that it would address its debts by selling off its non-retail assets and
cutting jobs at Conforma. Du Preez said that, "We believe the only way for Steinhoff to survive is for it to become a pure investment holding company. The group cannot trade itself out of this debt."
The company said that it intended to develop its markets in
Eastern Europe
Eastern Europe is a subregion of the Europe, European continent. As a largely ambiguous term, it has a wide range of geopolitical, geographical, ethnic, cultural, and socio-economic connotations. The vast majority of the region is covered by Russ ...
(through Pepco) and Britain (Poundland) through its Pepkor Europe assets alongside its core interests in South Africa.
During this period, Steinhoff sold its shares in Unitrans, a car dealer network;
sold its shares in KAP Industrial and PSG Group (in South Africa) and in
Showroomprivé (in Europe);
and also sold property assets attached to its retail operations in Europe.
In November 2019, UK chains
Bensons for Beds and
Harveys and upholstery and bedding manufacturer
Relyon were sold by Steinhoff to UK-based private equity group Alteri Investors.
On 8 July 2020, Steinhoff sold its remaining stake in Conforama France to
Mobilux Sàrl which has been the furniture retailer
BUT's parent company since 2016.
Mobilux has 50-50 ownership by both Andreas Seifert's WM Holding, which is associated with XXXLutz through its owner Andreas Seifert, and the American investment firm Clayton, Dubilier & Rice (CD&R).
[ In France, IKEA is the largest furniture retailer with a 15.43 per cent market share and Conforama and BUT have market shares of 10.86 per cent and 10.34 per cent which are second and third, respectively.][
As of 2022, Steinhoff had 50 per cent ownership in MattressFirm, 79 per cent ownership in Europe's Pepco Group, 51 per cent ownership in South Africa's Pepkor Holdings, and full ownership of Greenlit Brands in Australia and New Zealand.
]
Accounting scandal
Investigations into irregularities
In late November 2015, Steinhoff Europe Group Services offices in Westerstede were raided by German law authorities; in December 2015, German tax authorities began an investigation into suspected accounting fraud
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "language ...
at Steinhoff. The company said that the investigation concerned the proper disclosure of revenues
In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business.
Commercial revenue may also be referred to as sales or as turnover. Some companies receive revenu ...
and taxable profits; by December 2017, the investigation included four current and former managers, who were suspected of having overstated revenues at Steinhoff subsidiaries.
On 5 December 2017, Jooste, Steinhoff's CEO, resigned in connection to the accounting irregularities. Deloitte
Deloitte Touche Tohmatsu Limited (), commonly referred to as Deloitte, is an international professional services network headquartered in London, England. Deloitte is the largest professional services network by revenue and number of profession ...
, then Steinhoff's auditor
An auditor is a person or a firm appointed by a company to execute an audit.Practical Auditing, Kul Narsingh Shrestha, 2012, Nabin Prakashan, Nepal To act as an auditor, a person should be certified by the regulatory authority of accounting and au ...
, later said that it had uncovered the irregularities during the course of its 2017 audit and had "pushed" Steinhoff to investigate further; Jooste confirmed this. Steinhoff announced on the day of Jooste's resignation that its board had approached PricewaterhouseCoopers
PricewaterhouseCoopers is an international professional services brand of firms, operating as partnerships under the PwC brand. It is the second-largest professional services network in the world and is considered one of the Big Four accounting ...
to perform an independent forensic
Forensic science, also known as criminalistics, is the application of science to criminal and civil laws, mainly—on the criminal side—during criminal investigation, as governed by the legal standards of admissible evidence and criminal p ...
investigation, but the investigation took over a year to complete. In the interim, Wiese (who at first had stepped in as acting CEO) resigned as chairman, and, the week after Jooste's resignation, the Standing Committee on Finance of the Parliament of the Republic of South Africa condemned Steinhoff and called for investigations of the company by regulators, including the Financial Services Board and the South African Reserve Bank
The South African Reserve Bank (SARB) is the central bank of South Africa. It was established in 1921 after Parliament passed an act, the "Currency and Bank Act of 10 August 1920", as a direct result of the abnormal monetary and financial condit ...
. Steinhoff's value also plummeted. In the first day after Jooste's resignation, Steinhoff stocks lost 58 per cent in trading on the Frankfurt Stock Exchange and 56 per cent on the Johannesburg Stock Exchange; within two weeks, they lost almost 90 per cent. In 2018, Steinhoff announced a $12 billion writedown relating to the reversal of overstated revenues, profits, and asset
In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value ...
values.
The complete PwC report was not made public, but, in March 2019, Steinhoff published a summary of the report, which said that:A small group of Steinhoff Group former executives and other non-Steinhoff executives, led by a senior management executive, structured and implemented various transactions over a number of years which had the result of substantially inflating the profit and asset values of the Steinhoff Group over an extended period... Fictitious and/or irregular transactions were entered into with parties said to be, and made to appear to be, third party entities independent of the Steinhoff Group and its executives but which now appear to be closely related to and/or have strong indications of control by the same small group of people... it appears that the Steinhoff Group entered into a number of transactions (some of which were fictitious or irregular) with allegedly independent third party entities which resulted in the inflation of profits and asset values.
The report found that, between 2009 and 2017, the fictitious and irregular transactions had amounted to income
Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...
of over €
The euro sign () is the currency sign used for the euro, the official currency of the eurozone and unilaterally adopted by Kosovo and Montenegro. The design was presented to the public by the European Commission on 12 December 1996. It consists ...
6.5 billion ($7.36 billion), and therefore had inflated the group's income by a concomitant amount. In March 2019, the company share price was still down 96 per cent from its value before the scandal erupted, representing a total loss of about $15 billion in market value.
After a stint in which chief operating officer
A chief operating officer or chief operations officer, also called a COO, is one of the highest-ranking executive positions in an organization, composing part of the "C-suite". The COO is usually the second-in-command at the firm, especially if t ...
Danie van der Merwe served as acting CEO, Louis du Preez was appointed to replace Jooste. In April 2018, Peter N. Wakkie, a Dutch attorney who is closely associated with Mikhail Fridman
Mikhail Maratovich Fridman (also transliterated Mikhail Friedman; russian: Михаил Маратович Фридман; he, מיכאיל פרידמן; born 21 April 1964) is a Ukrainian-born, Russian–Israeli businessman, billionaire, and ...
, was appointed the deputy chairman and was previously the acting chairman of supervisory. In September 2019, Steinhoff replaced Deloitte with Mazars
Mazars is a global audit, accounting and consulting group employing more than 42,000 professionals in more than 90 countries through member firms. With head offices in France, Mazars has a network of correspondent partners and joint ventures in ...
as the firm's auditors.
Legal response
Steinhoff referred Jooste to South African authorities and launched a civil case against him, on the basis of what they viewed as his personal liability for the accounting scandal, although Jooste denied any knowledge of financial wrongdoing before December 2017. In March 2021, sources told Bloomberg Bloomberg may refer to:
People
* Daniel J. Bloomberg (1905–1984), audio engineer
* Georgina Bloomberg (born 1983), professional equestrian
* Michael Bloomberg (born 1942), American businessman and founder of Bloomberg L.P.; politician and m ...
that, in late 2020, German prosecutors in Oldenburg Oldenburg may also refer to:
Places
*Mount Oldenburg, Ellsworth Land, Antarctica
*Oldenburg (city), an independent city in Lower Saxony, Germany
**Oldenburg (district), a district historically in Oldenburg Free State and now in Lower Saxony
*Olde ...
had indicted
An indictment ( ) is a formal accusation that a person has committed a crime. In jurisdictions that use the concept of felonies, the most serious criminal offence is a felony; jurisdictions that do not use the felonies concept often use that of ...
Jooste and three others on charges arising from the initial German investigation. In October 2022, the South African Reserve Bank seized Jooste's South African assets in connection to an investigation of the accounting irregularities, although, at that time, no criminal charges had yet been laid in a South African court.
The scandal also gave rise to numerous civil claims against Steinhoff: by early 2021, it faced over 90 separate lawsuits – in South Africa, Germany, and the Netherlands – lodged by investors aggrieved by the drop in its share price after the December 2017 revelations. In early 2022, Steinhoff finalised plans to compensate retail investors for the share price drop through compensation from a combined payout "pot" of around R25 billion. Deloitte, as Steinhoff's auditor during the time the irregularities were taking place, agreed to contribute up to R1.3 billion (or €70 million) in compensation to claimants.
Dispute with Andreas Seifert
Predating the accounting scandal was a longstanding legal dispute between Steinhoff and Austrian investor Andreas Seifert of XXXLutz. Jooste linked the dispute to the accounting scandal, saying that Seifert was the source of the initial allegations of false accounting. The November 2015 raids of Steinhoff's Westerstede offices had also involved the seizure of documents signed by Seifert, though Seifert said that the documents, and his signature on them, had been forged
Forging is a manufacturing process involving the shaping of metal using localized compressive forces. The blows are delivered with a hammer (often a power hammer) or a die. Forging is often classified according to the temperature at which it ...
. Most centrally, however, the dispute concerned Steinhoff asset Poco
Poco was an American country rock band originally formed in 1968 after the demise of Buffalo Springfield. Guitarists Richie Furay and Jim Messina, former members of Buffalo Springfield, were joined by multi-instrumentalist Rusty Young, bassi ...
, a discount furniture chain: Seifert claimed 50 per cent ownership of Poco, while Steinhoff claimed it had bought Seifert out. In February 2018, an Amsterdam court ruled that Steinhoff had to change its accounts to reflect Seifert's part-ownership, and, later that year, a German court – which had been hearing the case since 2015 – urged the parties to settle. In late April 2018, Steinhoff reached a settlement with Seifert which saw Seifert buy a 50 per cent stake in Poco for an amount calculated as a multiple of Poco's earnings, on the basis of an agreed equity valuation
In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit fr ...
of €532.5 million for Poco in its entirety.
Brands
Steinhoff's South African brands include Ackermans, Buco, Dunns, Flash, HiFi Corp, Incredible Connection, John Craig, Pennypinchers, Pep
Pep is energy or high spirits; it may refer to:
* Pep band, an ensemble of instrumentalists
* Pep, the dog in ''Putt-Putt'' (series)
* Neilson Dairy confectionery brand
* Pep, New Mexico
* Pep, Texas
* Pep Cereal, by Kellogg
* Pep Comics, by MLJ ...
, Refinery, Russels, Shoe City, Tekkie Town and Timbercity. Powersales is another African Steinhoff brand.
In the UK, Steinhoff owns the high street brands Pep&Co
Pep&Co is a British discount fashion retail chain, owned by the South African company Pepkor (a wholly owned subsidiary of Steinhoff International) and based in Watford, England.
Pep&Co opened their first store in the Newlands Shopping Centre in ...
, Poundland
Poundland is a British variety store chain founded in 1990. It once sold most items at the single price of £1, including clearance items and proprietary brands. The first pilot store opened in December 1990 following numerous rejections by ...
and Sleepmaster.
In Ireland, Steinhoff operates Dealz
Dealz is a chain of discount retail stores predominantly in Ireland, Spain and Poland, offering a range of general merchandise products, the majority of which are at the fixed price of €1.50 (in Ireland and Spain); £1.20; or zl 6.-
...
and Pep&Co. Steinhoff's other European brands include Pepco and Kika in Poland, Slovakia and Hungary.
Steinhoff expanded into the United States market on 7 August 2016 when it acquired Mattress Firm.[
]
References
External links
*
{{SDAX companies
Companies based in Amsterdam
Retail companies established in 1964
Retail companies of South Africa
Companies listed on the Johannesburg Stock Exchange