Steinhoff’s offshore placement would help create the necessary liquidity and diversified shareholder base ahead of the furniture retailer’s primary listing in Frankfurt, an analyst said yesterday.
Steinhoff raised R7.8 billion in an accelerated bookbuild ahead of the much anticipated move of its primary listing to Europe. The group has received Reserve Bank approval to list in Germany, while keeping an inward listing on the Johannesburg bourse. It is believed that the big move will take place in September, after the company’s financial results.
For now, Steinhoff, which owns JD Group and KAP Industrial, has managed to raise R7.8bn in an accelerated bookbuild. It said the book was fully subscribed and more than 150 million shares would be issued at R52 per ordinary share, a 6.8 percent discount to its 30-day volume-weighted average price at the market close on Wednesday.
The amount raised would be paid to Steinhoff by investors in a combination of euros and dollars. The news saw its shares fall as much as 10.15 percent to R53.05 yesterday. The shares closed 8.54 percent lower at R54 on the JSE.
In a statement on Wednesday, Steinhoff also proposed a rights issue of 350 million shares, which would offered at the same price as the accelerated bookbuild. This values the rights issue at R18.2bn.
Ron Klipin of Crato Wealth said the offshore placing would create adequate liquidity and shareholder base for Steinhoff.
Klipin said with the rights issue at R52 a share, some shareholders were cashing in profits at R54 to R55 a share, as they would have additional shares in the rights issue.
“In addition, it seems likely that geared positions are being unwound ahead of the rights issue, which will result in a lower price for the time being,” he said.
The group listed on the JSE in 1998 through the merger of European and South African furniture and household goods businesses under Steinhoff as their common holding company. Steinhoff is an investment holding company with profit from its international operations comprising 90 percent of its global profit.
Given that the majority of its profits were generated outside of South Africa, Steinhoff said: “A listing on a major European stock exchange would more accurately reflect the geographic location of Steinhoff’s revenues, customers and store locations and also enhance the company’s ability to access global capital markets.”
It added that this would expand its European operations and growth opportunities in the international market.
Klipin believes Steinhoff’s growth strategy is focused on the European market. “Europe is trying to pick up and is coming out of a recession. Steinhoff has successfully been the winner in acquiring cheap assets during the global downturn. It has been able to build up critical mass, in a durable market, which has been consolidating with the demise of weaker players.”
He expressed his surprise at the group’s simultaneous large issues, saying it could indicate that there were big plans for more acquisitions. “I think the focus will be on the offshore acquisition, with Europe slowly coming out of recession and assets being relatively cheap.”
On Steinhoff’s domestic operations, which include KAP Industrial and JD Group, Klipin said it looked like local operations as a percentage would shrink over time. “At the moment South African consumers are a bit under pressure… I would say the focus is now in Europe,” he added.
The group spent about R17bn to buy French retailer Conforama in 2011. It also bought Austrian furniture retailer kika-Leiner last year.
Earlier this year, Steinhoff said it would take over the rest of ailing local furniture retailer JD Group.
The retailer, which owns brands such as Russells, Morkels and Joshua Doore, faces challenges in its furniture retail and finance businesses. In its latest financial results for the six months to December, JD Group said it would increase impairment provision by R602 million to R1.6bn.
In addition, R495m of the group’s bad debt had been written off, up from R184m in December 2012.
The group also discontinued its personal loan divisions.
Local subsidiary KAP Industrial delivered a good performance.