Christo Wiese. Picture: SUNDAY TIMES
Christo Wiese. Picture: SUNDAY TIMES

Christo Wiese has spent five decades building a small chain of South African clothing stores into a multi-billion-dollar retail empire spanning four continents, with ambitions of challenging mighty Ikea in home furnishings. Now he’s trying to stop his creation from tumbling like a house of cards.

The billionaire stepped in as interim CEO at Steinhoff International Holdings after his friend Markus Jooste resigned amid an accounting scandal that wiped out more than $13bn of the company’s market value this week — along with more than $2bn of Wiese’s personal fortune.

Steinhoff shares plunged as much as 35% on Thursday after a 63% drop on Wednesday, putting an end to one of SA’s most ambitious overseas business expansions. After snapping up retail chains ranging from France’s Conforama to the UK’s Bensons for Beds to Mattress Firm in the US, the company can say goodbye to deal-making; Wiese faces a breakdown of investor trust.

"There are clearly more unknowns than known information pertaining to the group’s real financial position and operations," Anchor Capital’s Sean Ashton said in a note. "It is clear that fraud remains a distinct possibility."

The shares plunged after the company said late on Tuesday that it uncovered irregularities in its accounts and delayed, indefinitely, a financial report scheduled for Wednesday. Jooste quit with immediate effect, ending a nearly 20-year career with the company. Wiese, the chairperson, said he’d lead Steinhoff for now.

There are clearly more unknowns than known information pertaining to the group’s real financial position and operations ... It is clear that fraud remains a distinct possibility

Wiese started work at clothing seller Pepkor in the Northern Cape in the 1960s. By 2014, he had expanded it into Africa’s biggest retailer. It was then that he sold it to Steinhoff, a furniture chain run by Jooste. That company had its own colourful history, having been started in then West Germany in the 1960s, selling cheap furnishings made in the communist East Germany to bargain hunters.

The $5.7bn Pepkor deal was the biggest take-over in SA in more than a decade and saw Wiese become Steinhoff’s biggest shareholder. The company now has nearly $23.6bn in annual sales. "I thought in terms of building a really world-class discount retailer, the two businesses would make an excellent fit," he told Bloomberg News at the time. Steinhoff is "the sort of company that can really go places, they’ve carved a niche for themselves in the world where they play".

Wiese was true to his word. Steinhoff went to France and the UK to make offers for appliance chain Darty and home-furnishings retailer Argos, respectively. Both bids ultimately failed, but Wiese and Jooste weren’t discouraged. Steinhoff was successful with an approach for Poundland, the British discount chain, before crossing the Atlantic to mop up Mattress Firm in the US.

In September, Steinhoff separately listed shares of its African retail subsidiary, focusing the parent company on global home-furnishings markets.

Wiese, who, like Jooste, did not answer calls to his cellphone, had already been hit by a series of financial setbacks before the share plunge on Wednesday. His investment vehicle Brait in the UK has suffered since the vote to leave the EU. Brait values clothing chain New Look, which it bought for about $1.2bn, at zero.

Steinhoff International debt also plunged on Wednesday, with €800m of senior unsecured bonds due in 2025 falling as much as €0.41 to €0.42, according to data compiled by Bloomberg.

After the Pepkor deal, Wiese invested a further $1.8bn in Steinhoff in September 2016, partly financing the deal by pledging shares to Citigroup, Goldman Sachs, HSBC Holdings and Nomura International. With the security price now lower than the value of the loan, he may be required to transfer more shares as collateral.

Both Wiese and Jooste own properties in the wine country around Cape Town, alongside other businessmen, including Whitey Basson, who ran Shoprite Holdings for 37 years until earlier this year.

Having lost his closest ally in Jooste, Wiese has called on an old colleague to help ride out the mess. Steinhoff has hired Pieter Erasmus, a former CEO of Pepkor, in an advisory role.

Erasmus is a "tried and tested lieutenant", said Syd Vianello, an independent retail analyst in Johannesburg. "Wiese has got a huge amount of money at stake and it’s in his best interest to ensure trust in the company is restored."

With a 19% stake in Steinhoff as well as 35% of Brait and 17% of Shoprite, Wiese remains a billionaire, but his days of challenging Richemont chairman Johann Rupert and Anglo American Gold Investment chairperson Nicky Oppenheimer for the top of SA’s rich list may be over. His net worth has almost halved this week to $2.2bn, according to the Bloomberg Billionaires Index.

Bloomberg

Please sign in or register to comment.