The beleaguered Steinhoff International, which is rushing to find enough money to pay its creditors, is selling off millions of shares in KAP Industrial. It is lowering its stake from 43% to 26%, which raised it R3.67 billion on Tuesday.
The shares were offered to pension funds and other institutional investors, which were eager to snap them up at a discount of 4.1% on the KAP closing price on Monday.
The fact that it is not selling off its whole stake is seen as a good sign, says Cassie Treurnicht, portfolio manager at Gryphon Asset Management. "It signals that Steinhoff may not be desperate to sell off at any cost."
Steinhoff's share price bounced 2.5% in Tuesday opening trading following its announcement, but dropped sharply again later in the day.
In a complex $1.1 billion deal, Steinhoff took control of KAP in 2012. KAP has investments in a range of industrial companies, including in logistics, timber and automotive accessories. Following a large deal to buy Safripol in 2016, it also is one of the biggest plastic producers in the country.
Steinhoff said in a statement that it continues to view KAP as a “compelling investment case, especially in view of recent events in South Africa and the prospect of improving economic conditions”. Still, it needed to sell the stake to earn cold hard cash.
Steinhoff has now lost more than 90% of its value following accounting irregularities under the watch of its disgraced former CEO Markus Jooste. The company warned last month that PricewaterhouseCoopers found that some of its assets, revenue and profit figures may have been overstated.
Steinhoff has to pay back billions to creditors in coming months. It previously said it wanted to raise $2 billion (R24 billion) through selling non-core assets to repay its debt. It has already raised more than R7 billion from selling its 25% stake in PSG.
The company recently appointed a former KPMG expert as its “chief restructuring officer”. Richard Heis, who retired in 2017, worked for 25 years in restructuring struggling companies.
Steinhoff’s fall from grace has already killed off one South African investment fund. Kaizen Asset Management recently announced that its strategic-opportunities hedge fund, which invested heavily in Steinhoff, will be closed as it lost too much of its value.
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