German shareholders trip up Steinhoff

A shareholder group from Germany has been identified as the main opponent voting against all the resolutions at Steinhoff’s annual general meeting on Thursday last week.

Schutzgemeinschaft der Kapitalanleger (SdK) – meaning the protection association of capital investors – got enough proxies from unhappy Steinhoff shareholders to vote down all the resolutions that were tabled.

That the resolutions were not passed will block all Steinhoff’s plans to play for more time to repay large tranches of debt that are due within a few weeks.

The liquidation of the Steinhoff International Holdings NV looks more likely than ever, although management indicated that it is still considering its options after the result of the voting.

Read/listen: ‘Steinhoff is technically insolvent’ (Dec 2022: English transcript, Afrikaans podcast)

Steinhoff management made a last-ditch effort at the meeting to convince minority shareholders that the agreement with large creditors to extend due dates for debt repayments, in exchange for 80% ownership of a new company housing all Steinhoff’s assets, is the best option to get some value from their shareholding.

Proposed creditors’ agreement

Steinhoff CEO Louis du Preez and CFO Theodore de Klerk reiterated the main reasons for the agreement, including:

• The group’s total liabilities (€10.26 billion at end February 2023) have exceeded its total assets for a considerable time, and there is no realistic prospect that this will change in the near future;
• If no solution is found, the debt will fall due and payable on 30 June 2023 and the group will be in default;
• A default will entitle the creditors to enforce their existing security rights on the group’s assets and, as a result, those investments can, separately or collectively, be sold in an enforcement sale;
• This will likely result in an inefficient and disorderly enforcement process and lower proceeds of the sale; and
• Lower proceeds will not be in the best interest of the company and its stakeholders, including shareholders, as this further decreases the likelihood that the debt is repaid in full, which will result in a higher residual debt that the company cannot repay.

Nothing

In short, Du Preez and De Klerk tried to warn minorities that they will then definitely get nothing.

The minorities were not convinced.

Read:

A Moneyweb reader seemed to sum up minorities’ feelings in a comment on an earlier story.

Johan Buys wrote that when the share price is 30c and the deal is that you end up with 20% after dilution, it is understandable that many people will say: “Stuff this, I’ve written this off as a bad mistake, but I am not going to make it easy to get rid of me.”

He says the skeletons must come out, asking about the company’s pursuit of former CEO Markus Jooste and other managers who might have been implicated in the accounting scandal that saw the share price crash by 99%.

Read:

It certainly looks like the SdK shareholders are thinking along the same lines.

Questions and answers

Steinhoff has disclosed that SdK has engaged with it, and published the questions and the company’s answers on the Steinhoff website.

The first lot of questions and answers, published on 13 March 2023, ran to 26 pages. Another 13 pages followed on 20 March, with some questions answered by referring back to the earlier answers.

It looks like SdK is a notable adversary.

For background, SdK was founded in 1959 with the purpose of assisting minority shareholders.

“Smaller investors often find it difficult to assert their interests against larger investors and company administrations due to their often small share of votes.

“In order to still get their rights and assert their own interests, which are often not in line with those of the major investors, the founding fathers of the SdK have come to the realisation that they have to pool their interests in order to make themselves heard.

“Nothing has changed in the association’s original purpose of independently representing the rights of private investors at general meetings and, if necessary, in court,” according to SdK.

Read: ‘The wheels of justice are eventually beginning to turn’: Christo Wiese

AGM

Steinhoff said in response to questions from Moneyweb that “a German shareholder protection group” received proxies from a significant number of mainly German retail investors and decided to vote against every resolution.

“Only 42.69% of Steinhoff’s issued shares were voted in total, and this group represented more than half of those shares,” it said.

The formal notification of the outcome of voting at the AGM noted that “none of the resolutions proposed in the notice of meeting made available to shareholders on the company’s website on 8 February 2023 were passed by the requisite majority of votes cast by the Steinhoff shareholders present or represented” at the meeting.

More than 1.8 billion shares were represented – the holders of some of which abstained from voting on some of the proposals. Steinhoff advised shareholders that only the ‘for’ and ‘against’ votes are counted in the vote (and together add up to 100%). Abstaining from voting is not considered to be a vote in law and is not counted in the calculation of the proportion of votes for and against a resolution.

On this basis, more than 61% voted against the resolution that it is necessary to implement the proposed transaction that would have postponed the repayment of debt for a further three years (until the end of June 2026).

The thinking behind the proposal is that the value of Steinhoff’s underlying operating assets might increase from a level management deems to be too low at the moment, and could be sold for better prices at a later stage, with the proceeds used repay the debt.

The implications are that only certain parts of the proposed transaction might be implemented through a restructuring plan, which would ultimately result in creditors holding 100% of the aggregate economic interest in a new holding company.

Alternatively, a debt default might drive creditors to enforce their security rights at different levels in the group, leading to the sale of the underlying companies, such as Pepkor, Mattress Firm and Pepco.

Read: Steinhoff raises R4.9bn from selling Pepkor shares

No to directors’ remuneration

Some 60% voted against the adoption of the annual financial statements for the year to end September 2022 and nearly 65% against the reappointment of David Pauker as a supervisory director.

Unsurprisingly, more than 67% of the advisory vote in respect of the remuneration report for the last financial year was against the proposal, indicating that shareholders are not happy with directors’ pay cheques.

Nearly 77% voted against a proposal to amend the remuneration policy to give directors more money.

The reappointment of auditors was also voted down, with Steinhoff saying that it still has auditors, as Mazars has been already appointed for the 2023 financial year. This resolution was in respect of the financial year to end September 2024.

The vote not adopting the financial statements does not really have significant implications, according to Steinhoff. “It was also the case at our 2019, 2020 and 2021 AGMs,” it says.

Steinhoff says it is currently considering its options and will make an announcement at the appropriate time.