Steinhoff International
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Steinhoff International was a multinational
holding company A holding company is a company whose primary business is holding a controlling interest in the Security (finance), securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own Share ...
that was dual listed in Germany and South Africa. It was officially delisted in October 2023. Its holdings were in the
retail Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is the sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholes ...
sector, primarily in furniture and household goods, and included a 43,8% stake in South Africa's
Pepkor Pepkor is a South African-based investment and holding company focused on the discount and value consumer retail and fintech markets. The majority of operations are in South Africa, and operations extend to other African countries and Brazil. It ...
group. The company operated in Europe, Africa, Asia, the United States, Australia, and New Zealand. It was well known for an accounting scandal which led to criminal charges against its former chief executive, Markus Jooste.


History

Steinhoff was founded in 1964 by Bruno Steinhoff in Westerstede, Germany. Bruno Steinhoff sourced furniture from
communist Communism () is a sociopolitical, philosophical, and economic ideology within the socialist movement, whose goal is the creation of a communist society, a socioeconomic order centered on common ownership of the means of production, di ...
countries in Europe, for resale in Western Europe. In 1997, Steinhoff acquired 35 per cent of Gommagomma, a furniture company based in South Africa, and prepared for a
merger Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...
the following year. The company moved its headquarters to South Africa in 1998, attracted by the low production costs there, 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 The chair, also chairman, chairwoman, or chairperson, is the presiding officer of an organized group such as a board, committee, or deliberative assembly. The person holding the office, who is typically elected or appointed by members of the gro ...
and Markus Jooste as
managing director A chief executive officer (CEO), also known as a chief executive or managing director, is the top-ranking corporate officer charged with the management of an organization, usually a company or a nonprofit organization. CEOs find roles in variou ...
.


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, Europe's second largest
retail Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is the sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholes ...
er 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 focused on the discount and value consumer retail and fintech markets. The majority of operations are in South Africa, and operations extend to other African countries and Brazil. It ...
, a South African investment and
holding company A holding company is a company whose primary business is holding a controlling interest in the Security (finance), securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own Share ...
focused on low-end retail; the $5.7 billion cash-and-share deal made
Christo Wiese Christoffel Hendrik Wiese (born 10 September 1941) is a South African billionaire businessman who was the longtime chairman of Shoprite and Pepkor. He was also the chairman and largest shareholder of Steinhoff International until its collapse i ...
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 (, former German name: , ''FWB'') is the world's 3rd oldest and 12th largest stock exchange by market capitalization. It has operations from 8:00 am to 10:00 pm ( German time). Organisation Located in Frankfurt, ...
, and founded a new Dutch holding company, Steinhoff International Holdings NV, based in
Amsterdam Amsterdam ( , ; ; ) is the capital of the Netherlands, capital and Municipalities of the Netherlands, largest city of the Kingdom of the Netherlands. It has a population of 933,680 in June 2024 within the city proper, 1,457,018 in the City Re ...
. This move reflected Steinhoff's shift from its traditional markets, in the
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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 was 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 . It includes the 50 Prime Standard shares that rank in size immediately below the companies included in the DAX index. T ...
with capitalization of over €20 billion but had a low trading volume. In July 2016, UK discount retail chain Poundland 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, were 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. History Founding Mattress Firm was founded by Steve Fendrich, Harry Roberts, and Paul Stork. The thr ...
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, w ...
bankruptcy 2 months later after financial restructuring with support from AlixPartners.


Debt problems

More significantly, in the aftermath of a major accounting scandal in 2017–2019 , Steinhoff faced significant
debt Debt is an obligation that requires one party, the debtor, to pay money Loan, borrowed or otherwise withheld from another party, the creditor. Debt may be owed by a sovereign state or country, local government, company, or an individual. Co ...
s – $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 In finance, margin is the collateral that a holder of a financial instrument has to deposit with a counterparty (most often their broker or an exchange) to cover some or all of the credit risk the holder poses for the counterparty. This risk ...
to Steinhoff. Nomura confirmed that it had booked an unrealised loss of 14 billion
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($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
shareholder A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...
s 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. Its eastern boundary is marked by the Ural Mountain ...
(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 2023, Steinhoff had 45 per cent ownership in MattressFirm, 79 per cent ownership in Europe's Pepco Group, 43 per cent ownership in South Africa's Pepkor Holdings, and full ownership of Greenlit Brands in Australia and New Zealand.


Corruption scandal


Investigations into corruption scandal

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 scandals are business scandals that arise from intentional manipulation of financial statements with the disclosure of financial misdeeds by trusted executives of corporations or governments. Such misdeeds typically involve complex ...
at Steinhoff. The company said that the investigation concerned the proper disclosure of
revenue In accounting, revenue is the total amount of income generated by the sale of product (business), goods and services related to the primary operations of a business. Commercial revenue may also be referred to as sales or as turnover. Some compan ...
s 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 is a multinational professional services network based in London, United Kingdom. It is the largest professional services network in the world by revenue and number of employees, and is one of the Big Four accounting firms, along wi ...
, 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 an ...
, 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, also known as PwC, is a multinational professional services network based in London, United Kingdom. It is the second-largest professional services network in the world and is one of the Big Four accounting firms, alon ...
to perform an independent
forensic Forensic science combines principles of law and science to investigate criminal activity. Through crime scene investigations and laboratory analysis, forensic scientists are able to link suspects to evidence. An example is determining the time and ...
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 condi ...
. 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 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 of ownership that can b ...
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. F ...
of over
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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 (COO), also called chief operations officer, is an executive in charge of the daily operations of an organization (i.e. personnel, resources, and logistics). COOs are usually second-in-command immediately after the C ...
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; ; ; born 21 April 1964) is a Ukrainian-born, Russian–Israeli tycoon and Russian oligarchs, oligarch. He is one of the co-founders of Alfa Group, Alfa-Group, a multinational Rus ...
, was appointed the deputy chairman and was previously the acting chairman of supervisory. In September 2019, Steinhoff replaced Deloitte with Mazars 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
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that, in late 2020, German prosecutors in Oldenburg 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 offense is a felony; jurisdictions that do not use that concept often use that of an indi ...
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. In September 2024, South Africa's Financial Sector Conduct Authority ( FSCA) is expanding its investigation into the Steinhoff scandal, focusing on potential violations by additional individuals related to financial statements from 2014 to 2016. The investigation covers three types of market abuse: insider trading, false statements, and price manipulation. The scandal, South Africa's largest corporate fraud, resulted in losses exceeding 250 billion rands for investors. 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 . 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 compression (physics), compressive forces. The blows are delivered with a hammer (often a power hammer) or a die (manufacturing), die. Forging is often classif ...
. Most centrally, however, the dispute concerned Steinhoff asset Poco, 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 of €532.5 million for Poco in its entirety.


Brands

Steinhoff's South African Pepkor brands included Ackermans, Buco, Dunns, Flash, HiFi Corp, Incredible Connection, John Craig, Pennypinchers, Pep, Refinery, Russels, Shoe City, Tekkie Town and Timbercity. Powersales was another African Steinhoff brand. In the UK, Steinhoff owned the high street brands, Poundland (under Pepco Group) and Sleepmaster. In Ireland, Steinhoff operated Dealz (under Pepco Group) and Pep&Co. Steinhoff's other European brands included Pepco (under Pepco Group) 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 Former dual-listed companies 1964 establishments in West Germany 2023 disestablishments in Germany 2023 disestablishments in South Africa Corruption in South Africa