South African retailer Steinhoff raises $332 million from sale of KAP Industrial stake

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Steinhoff, a South African retailer, announced it had raised 4.8 billion rand ($332 million) from the sale of its 26 percent stake in KAP Industrial to pay off debt and shore up its finances.

In December 2017, Steinhoff admitted “accounting irregularities”, a development which shocked investors who had backed its reinvention from a small South African business to a multinational retailer at the vanguard of the European discount furniture retail industry.

The news wiped about 85 percent of the company’s market value and threw it into a liquidity crisis.

A statement released by the Steinhoff revealed that it had sold 694 million KAP shares at 6.85 rand per share, a 9.4 percent discount to Tuesday’s closing price. The company added the book of demand was oversubscribed.

Steinhoff said the placement would be offered to institutional investors only and will result in the company no longer holding an interest in KAP.

Steinhoff shares jumped in early trade on the Johannesburg Stock Exchange, and were up more than 6 percent. Shares in KAP, a diversified industrial group selling everything from chemicals and auto components to mattresses, were down more than 7 percent.

In South Africa’s biggest corporate scandal, an investigation carried out by PwC found that Steinhoff recorded fictitious or irregular transactions totalling 6.5 billion euros ($7.3 billion) over a period covering the 2009 and 2017 financial years.

Steinhoff sold down its stake in KAP in March 2018 after placing 450 million shares, or a 17 percent stake, also via an accelerated bookbuild in a bid to plug a liquidity gap. The company has also raised cash from the sale of stakes in South African investment firm PSG Group, French online retailer Showroomprive.com, as well a property in Austria.

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