Wiese’s resignation could be viewed as positive move - analysts
Christo Wiese resigned last night following mounting pressure after the company admitted to fraud.
JOHANNESBURG - Market analysts say the resignation of Steinhoff’s chairman Christo Wiese could be viewed as a positive move to clean up the retail group.
Wiese resigned on Thursday night following mounting pressure after the company admitted to fraud.
Steinhoff lost about 90% of its stock value on the JSE after CEO Markus Jooste stepped down last week.
Viv Govender, a senior analyst at Rand Swiss, says that much of the damage has already been done.
“Even if there's like a 50% move this morning, when compared to what happened in one day [when Jooste resigned], because the share price has already fallen so much.”
Meanwhile, Wayne McCurrie agrees, saying that market shares might react positively to Wiese's resignation.
“Because then at least you have a brand new person in there who can hopefully see a little bit more objectively because, of course, Wiese had a significant portion of his wealth in Steinhoff.”
Calls have been made for those working at Steinhoff to come forward to conclude the investigation with speed.
Once a must-have for investors who backed its reinvention from small furniture outfit into a retail empire, Steinhoff has seen its shares crash more than 80% since last week when it ordered an investigation into its accounts and parted ways with long-serving chief executive Markus Jooste.
Steinhoff said Wiese, its top shareholder and chairperson who stood in as chief executive last week, had offered to step down to reinforce independent governance and address any possible conflict of interest.
Wiese has been chairperson since last year and a board member since 2013. He owns about 22% of the company, the stake he built in 2014 when he sold his clothing retailer Pepkor to Steinhoff via a combination of cash and shares.
Steinhoff named Heather Sonn, a member of the supervisory board and its independent sub-committee, as acting chairperson, and said Wiese’s son Jacob had also resigned from the board.
The accounting scandal has tarnished the 76-year-old’s credentials as one of South Africa’s most respected stewards of shareholder capital.
It has also reduced his stake in Steinhoff: the company said on Thursday that banks have sold 98.4 million shares they used as security to lend Wiese $1.89 billion to fund the purchase of additional shares in Steinhoff in September 2016.
Wiese started budget clothing retailer Pepkor in the 1960s, in Upington on the southern edges of the Kalahari desert, but is best known for transforming grocery retailer Shoprite from just six shops in the 1970s to hundreds of stores across Africa.
He was also instrumental in reinventing Steinhoff, turning it from a modest distributor of furniture made in communist era eastern Europe to a global household goods retailer, vying for market share with the likes of IKEA.
But he suffered a setback this year when Steinhoff and Shoprite, in which Wiese owns a 20% stake, called off a deal in February to merge to create an African shopping giant, preventing Wiese from bringing more of his retail assets under one roof.
His resignation comes a day after Steinhoff’s second largest shareholder Public Investment Corporation expressed discomfort about possible conflict of interest in having Wiese as interim chief executive.
Steinhoff, which moved its primary share listing from Johannesburg to Frankfurt two years ago, has been under investigation for suspected accounting fraud in Germany since 2015. Four current and former managers are under suspicion of having overstated revenues at subsidiaries, prosecutors said.
Steinhoff has previously said that the investigation related to whether revenues were booked properly, and whether taxable profits were correctly declared.
Additional reporting by Reuters.