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Exclusive: South Africa's Steinhoff considers PSG, KAP stake sales to lift liquidity - sources

JOHANNESBURG/ FRANKFURT (Reuters) - South Africa’s Steinhoff (SNHG.DE) is considering selling stakes worth a combined $1.4 billion in local companies PSG Group and KAP Industrial to help plug a liquidity gap at the retailer, two sources familiar with the matter said.
FILE PHOTO: A Poundland employee checks products in a store in London, Britain November 10, 2015. REUTERS/Stefan Wermuth/File Photo

Steinhoff (SHFFp.J) (SNHJ.J), the owner of more than 40 retail brands including Conforama, Mattress Firm and Poundland, is seeking to shore up its finances after more than $14 billion was wiped off its market value last week following its disclosure of accounting irregularities and its chief executive’s exit.

Steinhoff plans to raise around 2 billion euros ($2 billion) from the sale of non-core assets and the proceeds of debt repayments from African unit Steinhoff Africa Retail (SRRJ.J).
“It cannot get any more non-core than their stake in PSG,” a source in Johannesburg said. “It is on the table and so is the stake in KAP.”

The likely sale of the stakes was corroborated by a second source based in Frankfurt, who said they were first on the list of possible divestitures to plug funding holes.
Steinhoff owns about 25 percent of PSG (PSGJ.J), a 60 billion rand ($4.40 billion) investment holding company, and 39 percent of diversified industrial group KAP Industrial (KAPJ.J), which is worth around 6.1 billion rand at current market prices.
Steinhoff, KAP Industrial and PSG Group declined to comment.
The Johannesburg source, who declined to be named because he is not authorized to speak to the media, also said the stakes would most likely be sold in chunks via a so-called accelerated book build to institutional investors.

Steinhoff said on Sunday it had called in turnaround specialist AlixPartners to help shore up its liquidity. It also hired U.S investment bank Moles & Co to help it prepare for a delayed meeting with lenders in London next week.
MODEST RECOVERY

Once a must-have for investors who backed its reinvention from small South African furniture outfit into an empire with brands spanning some 30 countries, Steinhoff’s shares dropped more than 80 percent before a modest recovery this week.
By 1011 GMT, the stock was up 36 percent in Johannesburg and Frankfurt, extending gains for a second straight day and recouping just over $2 billion from last week’s crash.
Separately, South Africa’s trade and industry department said it would investigate whether Steinhoff breached domestic company laws, joining the local bourse operator and German financial watchdog Bafin in examining its actions.

Steinhoff has been under investigation for suspected accounting irregularities by the state prosecutor in Oldenburg, Germany since 2015 and four current and former managers are under suspicion of having overstated revenues at subsidiaries, prosecutors said.
Steinhoff has previously said this related to whether revenues were booked properly, and whether taxable profit was correctly declared.

Additional reporting by TJ Strydom and Ed Stoddard in Johannesburg; Editing by James Macharia and Alexander Smith
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