PIC takes around R40m for half its Steinhoff stake and runs

The Public Investment Corporation (PIC) has managed to dispose of more than half of its remaining stake in technically-insolvent retailer Steinhoff.

This was revealed in an announcement by Steinhoff late last week in which it disclosed that the PIC’s holding was 4.34% of the company (or 185 million shares).

The PIC has held 9.91% of Steinhoff (423 million shares) since December 2017, when it filed a notification with the Netherlands Authority for Financial Markets (AFM). It appears to have trimmed this stake slightly to 8.56%, according to a 2021 statement.

Its latest filing with the AFM is dated 5 May, which means it would’ve likely disposed of 4.22% of the company in early May (possibly beginning in late April), equal to over 180 million shares.

The sheer size of the stake means it would’ve probably taken weeks to sell down the stake as an on-market transaction. (It would be a stretch to imagine there are any buyers who would’ve bought this size stake in an off-market deal.)

Steinhoff’s share price has traded between 20c and 29c over the last month.

Using a simplistic 25c as an average value, the stake would’ve netted the PIC just more than R45 million had it disposed of all these shares recently. But because of the size of the holding, it undoubtedly achieved a lower average price (perhaps 23c?). It is unlikely that the PIC got much more than R40 million for the stake.

One can see evidence of the sale in the volumes of shares traded in the stock of late. The average trading volume for Steinhoff over the past 52 weeks has been 6.3 million shares a day. Contrast this with the daily average in the last 10 days of 15 million, and over the last three months of 18 million. (Even if it had been steadily selling down its stake over the three months, the share price has mainly remained below 30c).

Optimism

What is curious is that the PIC has hung onto this stake throughout the last five years following the collapse, perhaps somehow believing that it would be able to recover some of the destroyed value.

Had it sold near the most recent high (in January last year), it could’ve netted above R5 a share – 20 times more than it ended up getting. The difference? Only nearly R1 billion.

The share price of the retail group collapsed in December following the announcement of a proposed restructuring in which creditors would receive 80% of a new unlisted holding company.

Read:

Under the proposal, existing shareholders would receive 20%.

Shareholders had to vote on the plan at the group’s AGM in March. They were cautioned that voting against the proposal would see them walking away with nothing. Creditors would own 100% of the company.

Only around 40% of shareholders voted at the AGM. Those that did voted against every single resolution, including the one pertaining to the restructuring.

Restructuring

Following this, management has proceeded with the restructuring under the so-called ‘Whoa’ (from ‘Wet Homologatie Onderhands Akkoord’; Dutch Court-Approved Restructuring Plan Act) procedure, and it says this is to “avoid a bankruptcy”. This simply requires court approval in the Netherlands.

Bizarrely, the group’s share price continues to hold up (it has remained above 20c or one euro cent).

Technically, once the Whoa procedure is implemented, the company will be delisted and shareholders will get zero.

This process is being challenged as the group attempts to proceed with it and continues to implement its settlement with investors.

Settlement agreement

In September 2021, the PIC and Steinhoff announced they had reached a settlement agreement “to support the implementation of the Steinhoff global settlement”.

The PIC had, in 2018, joined a group of approximately 40 institutional investors who had brought damages claims against Steinhoff before the Dutch court. Mediation between the parties resulted in the settlement agreement.

The PIC said it “believes the proposed settlement was in the best interests of its clients, given the alternative cost of protracted litigation and related uncertainties, and the prospect of further diminishing share value”.

To date, details of the settlement have not been disclosed.

Steinhoff announced this year that the effective date of the global settlement was 15 February. It began distributing cash recoveries to claimants from last week.

Read: Steinhoff raises R4.9bn from selling Pepkor shares [Feb 2023]

It had received 43 000 claims from individuals and institutions, totalling €3.2 billion [around R67 billion at the current exchange rate] in value.