Christo Wiese-linked retailer Steinhoff looks to sell stake in Pepkor Group in move to offload $11-billion debt burden

Steinhoff International Holdings, a South Africa-based international retail holding linked to billionaire businessman Christo Wiese, is on track to sell its stake in its pan-European subsidiary, Pepco Group, as part of a strategic move to reduce its €9.83-billion ($11 billion) debt burden.

Pepco Group is a fast-growing, multi-format, pan-European discount variety retailer headquartered in the United Kingdom. It operates more than 3,500 stores in 17 countries in Europe, serving 50 million customers per month.

The company opened 146 new stores in the first quarter of its 2022 fiscal year, while revenues increased by 12 percent year-on-year as a result of store expansion across all operating territories and brands.

Theodore de Klerk, CFO of Steinhoff, said the South Africa-based international retail group owns just under 80 percent of Pepco’s shares, giving it a majority stake in the pan-European discount retailer.

The decision to sell its stake in Pepco comes nearly three days after the Wiese-linked retailer announced plans to pay investors a $1.6-billion (R24.4 billion) settlement in accordance with the approval that it received from a South African high court.

The approval aligns with the company’s plan to settle more than R122 billion ($8 billion) in combined claims stemming from the retailer’s 2017 accounting scandal, which resulted in the resignations of Markus Jooste and Wiese.

The move represents a long-standing effort to resolve protracted years of legal battles to regain investor confidence and get the company’s operations back on the path of sustainable earnings.

On Feb. 15, the settlement offer will be paid to the 90,000 shareholders who lost a significant volume of money as a result of the accounting scandal.

In response to the announcement, the company’s stock rose by more than 2.03 percent to R4.52 ($0.29) per share at the time of writing, indicating investor support for the proposed settlement.

Wiese, a South African businessman who was the company’s largest shareholder in 2017, revealed that the settlement plan had already been signed off on in the Netherlands, where Steinhoff is registered, and that some parties who initially opposed the deal had agreed to settle.

“Though no doubt there will be further chapters, because the people responsible for the fraud, that still has to be sorted out,” he said.

Steinhoff has been fighting for survival for more than four years, ever since a Deloitte audit report revealed an accounting fraud that resulted in a drop in the company’s share price and valuation, which quickly escalated to police and regulatory investigations in Europe and South Africa.

A slew of inflated profits and asset values later surfaced, forcing the company to sell a variety of international retail assets to raise funds.

Not long ago, Mattress Firm Group, a mattress business unit linked to the organization, applied for an IPO of its common stock in line with the New York Stock Exchange (NYSE) regulatory listing process as part of Steinhoff’s strategic plans to secure long-term profitability.