JOHANNESBURG – Steinhoff soared nearly 20 percent in early trade on the JSE, following the appointment of Louis du Preez as a permanent chief executive and the granting of a bankruptcy application by US subsidiary Mattress Firm.
The beleaguered international retailer handed Du Preez the reins to reignite its fading fortunes following the 2016 accounting scandal that wiped R200 billion of the group's market capitalisation and fell its stock 96 percent.
The company said caretaker chief executive Danie van der Merwe would step aside to make way for Du Preez.
The two were pivotal in Steinhoff’s battle for survival in the past 11 months with Du Preez in particular credited with leading a lifesaving restructuring of nearly $11.4bn (R159.04bn) debt.
However, analysts were quick to to point that Du Preez’s appointment could be a poisoned chalice.
Vestact Asset Managers portfolio manager Michael Treherne said Du Preez would need to inspire the confidence of shareholders, creditors and investors alike to help turn the group around.
Treherne said the path to restoration would be peppered with prep talk to creditors and shareholders about deferred payments and dividends.
“This is a job you wouldn't want to take, he is being put where there is a high probability of failure from the start, what with all the stuff about corruption still coming up.
“They have done what needed to at this stage, they have told creditors they are not going to pay them now, but will pay more later. They have kicked the can down the road, but it is precarious, because it will take one or two creditors to recall their loans and then it might all collapse.”
Du Preez would be expected to grow Steinhoff chains such as Conforama in France and Poundland in the UK and shore up the share price.
He would also have to deal with the findings in the PricewaterhouseCoopers list of lawsuits, including class action litigation from irate shareholders and a R59bn claim by former chairperson Christo Wiese.
Steinhoff said significant progress has been achieved, and that it was to shortly launch a company voluntary arrangement in relation to Steinhoff Europe and a consent solicitation process in respect of Steinhoff Finance Holding issued convertible bonds.
“The company's efforts since December 2017 have been largely focused on stabilising the group, while engaging in an extremely complex and extensive restructuring process,” the group said.
Du Preez, who is presently commercial director, joined the Steinhoff group last year.
The group said he had developed good relations with key stakeholders and a deep knowledge of the global operations.
“He's the ideal candidate to lead the company through the final stages of the restructuring and into the next phase of its development. His designation as chief executive will provide important continuity for the group and its stakeholders,” Steinhoff said.
Mark Hodgson, equities analyst at Avior Capital Markets, said while Du Preez’s appointment was high risk, it was not too surprising given that he had been there through the crises and was not tainted by former chief Markus Jooste's era. Hodgson said this would give him authority to make decisions for a turnaround.
“It is still a tough ask as Steinhoff arguably has assets to sell,” Hodgson said.