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Case Spotlight: Steinhoff Nearly Doubles Settlement Offer

Summary:

  • The revelation of accounting irregularities led to a 90% fall in Steinhoff’s share price.

  • Proposed class action settlements currently total €769 million.

  • Investors are eligible to participate in class actions if they traded in Steinhoff shares between March 2, 2009 and December 5, 2017.

  • Participation deadline has yet to be determined, but not before December 2021.

CompanySteinhoff International Holdings NV and Steinhoff International Holdings Proprietary Limited
JurisdictionNetherlands
ExchangeJohannesburg Stock Exchange ("JSE") and Frankfurt Stock Exchange ("FSE")
IndustryRetail
ClaimsAccounting Irregularities and Compliance Failures
Relevant PeriodMarch 2, 2009 - December 5, 2017
Participation DeadlineTBD - No Sooner Than December 2021

Case Background
Steinhoff International Holdings NV (“SIHNV”) is a global investment company that engaged in the manufacture and retail of furniture, household goods, and clothing. Steinhoff International Holdings Proprietary Limited (“SIHPL”) is a South African holding company for SIHNV subsidiaries (together with SIHNV, “Steinhoff”).

At its height, Steinhoff operated in over 30 countries with more than 6,500 retail outlets and was valued at over $20 billion.

On December 5, 2017, Steinhoff’s CEO Markus Jooste abruptly resigned after the company announced an investigation by its consultant PricewaterhouseCoopers (“PwC”) into accounting irregularities. The share price immediately plunged 66% and continued to fall by over 90% as PwC’s investigation revealed that the company and its executives had entered into a number of fictitious or irregular transactions that substantially inflated profits and assets by nearly $12 billion.

Dozens of legal proceedings followed.

Proposed Settlements
As part of an attempted reorganization, Steinhoff now seeks to pay EUR 613M in a global settlement to resolve as many claims against it as possible. EUR 442M of this amount will be used to compensate Market Purchase Claims (“MPC”) related to investor purchases and sales of Steinhoff securities on the JSE and FSE from March 2, 2009 through December 5, 2017.

In addition to the Steinhoff settlement, there are two other proposed settlements that are being coordinated in conjunction with the Steinhoff settlement, totaling approximately EUR 156M, one with Steinhoff’s former auditors Deloitte & Touche and another with Steinhoff’s directors and officers and their insurers. EUR 111M of this amount will be used to compensate MPC claims.

If approved, the three settlements (collectively, the “Steinhoff Settlement”) will be administered together by Computershare Investor Services plc (the “Administrator”) under the supervision of the Stitching Steinhoff Recovery Foundation (the “Foundation”) in the Netherlands and a similar arrangement in South Africa.

The Steinhoff Settlement is being implemented through two schemes: suspension of payment (“SoP”) proceedings in the Netherlands for SIHNV and Section 155 proceedings in South Africa for SIHPL.

For the settlement to be approved, two things must occur:

  1. In the Dutch SoP proceeding, the court-appointed committee of creditor representatives must vote to approve a composition plan and it must be confirmed by the District Court of Amsterdam
  2. In the South Africa proceeding, creditors must vote to approve a Section 155 proposal to resolve creditor claims and it must be ratified by the High Court of South Africa.

Steinhoff Nearly Doubles its Settlement Offer
In July 2021, Steinhoff nearly doubled its settlement offer in this matter to the present amount of EUR 613M, with EUR 442M of that amount dedicated to MPC claims. Its previous offer in July 2020 was for EUR 370M, with EUR 266M for MPC claims.

Steinhoff issued a statement regarding the settlement increase and noted that the company’s underlying financial and operational performance has materially improved since 2020, which has allowed it to offer a greater settlement amount, and it increases its offer because a settlement “represents a significantly better outcome for litigants and creditors relative to the outcomes of no settlement.[1]” It “urges stakeholders to avoid further delay and support progress of the proposals for approval by claimants and the courts.[2]”

Determining Eligibility
Investors are eligible to participate in MPC claims if they acquired Steinhoff shares during the relevant time period. The Steinhoff Settlement includes other non-MPC claims, such as contract claims on behalf of parties who received Steinhoff shares in consideration for the sales of their businesses and a variety of other creditor claims.

FRT will only assist clients with MPC claims.

Timeline
On September 3, 2021, the SoP committee of representative creditors is scheduled to vote on approving the composition plan in the Netherlands. On September 6, 2021, creditors will vote on approving the Section 155 proposal in South Africa. The claim filing deadline will be set for three months after the settlement is approved by the courts in both jurisdictions.

Next Steps
If you have compensable losses and wish to register with the administrator, you must submit a signed claim form and power of attorney. FRT will provide these documents upon request.

 

[1] https://www.steinhoffsettlement.com/media/3496019/announcement_-_increased_settlement_proposal__fse_.pdf
[2] https://www.steinhoffsettlement.com/media/3496019/announcement_-_increased_settlement_proposal__fse_.pdf

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Founded in 2008, Financial Recovery Technologies (FRT) is the leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities and other class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability, and transparency available. For more information, go to www.frtservices.com.

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