Steinhoff International/Steinhoff Investment - Abridged pre-listing statement
Steinhoff International Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1998/003951/06)
Share code: SHF ISIN: ZAE000016176
(`Steinhoff International`)
Steinhoff Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1954/001893/06)
Share code: SHFF ISIN: ZAE000068367
(A wholly-owned subsidiary of Steinhoff International)
(`Steinhoff Investment` or `the company`)
ABRIDGED PRE-LISTING STATEMENT
- PRIVATE PLACEMENT OF 6 500 000 CUMULATIVE, NON-REDEEMABLE, NON-
PARTICIPATING, VARIABLE RATE PREFERENCE SHARES WITH A PAR VALUE OF 0,1 CENT
EACH IN THE SHARE CAPITAL OF STEINHOFF INVESTMENT AT A SUBSCRIPTION PRICE OF
R100 PER SHARE (`the preference shares`)
- THE LISTING OF THE PREFERENCE SHARES ON THE JSE
This abridged pre-listing statement is not an invitation to the public to
subscribe for preference shares in Steinhoff Investment but has been prepared
for the purposes of providing information on the preference shares and on
Steinhoff International and Steinhoff Investment in terms of the Listings
Requirements of the JSE Securities Exchange South Africa (`the JSE`).
This abridged pre-listing statement is prepared and issued in terms of the
Listings Requirements relating to a private placement by Steinhoff Investment
in terms of which it has raised R650 million from select investors by way of
an offer for subscription of 6 500 000 cumulative, non-redeemable, non-
participating, variable rate preference shares with a par value of 0,1 cent
each at a subscription price of R100 per share (`the private placement`).
Subscriptions could only be made for a minimum subscription amount of R100 000
per single addressee acting as principal. There was no maximum subscription
amount per single addressee acting as principal. The private placement was not
underwritten.
1. INTRODUCTION AND PURPOSE
1.1 The Steinhoff group of companies (`Steinhoff`), via its wholly-owned
subsidiary Steinhoff Investment, wishes to raise cost-effective permanent
share capital as part of its overall capital management programme.
1.2 Non-redeemable or, as they are commonly referred to, `perpetual`
preference shares, offer investors and the issuer an alternative to ordinary
equity and debt. These shares are permanent capital that rank ahead of
ordinary shares on liquidation.
1.3 Debt funding is often the most cost-effective funding method (compared
to equity funding) except when used to fund long-term assets of a capital
nature. Preference shares are ideally suited to fund these assets cost-
effectively. The servicing costs of preference shares can be further reduced
if the issuer of preference shares has secondary tax on companies (`STC`)
credits that could be utilised to reduce STC liabilities as STC is payable on
the net amount of dividends paid less dividends received.
1.4 The issue of the preference shares will provide investors with the
opportunity to invest in the Steinhoff group utilising an instrument that:
- is a long-term asset with potential capital growth (capital growth would
result if the market price of the preference shares rises above the issue
price of R100 per share as a result of the market favourably viewing the risk-
return profile of the preference shares);
- may be traded freely through its listing on the JSE;
- provide investors with an attractive tax-free return paid semi-annually;
and
- will enjoy priority to ordinary shareholders in respect of dividends and
in case of liquidation.
1.5 The issue of the preference shares will enable Steinhoff to raise cost-
effective funding that:
- can be utilised for equity acquisitions;
- increases its permanent capital and strengthens its balance sheet;
- does not dilute the existing ordinary shareholders` interests in the
company; and
- reduces its cost of capital without the negative effect on cash flow
caused by capital repayments normally associated with debt.
1.6 The preference shares represent an attractive alternative investment
opportunity for the broader investment community. By virtue of being listed on
the JSE, the preference shares will be a liquid instrument.
2. NATURE OF BUSINESS AND PROSPECTS
2.1 Nature of business
2.1.1 The Steinhoff group manufactures, warehouses and distributes a wide
range of household goods on a global basis, including upholstered furniture,
case goods and bedding, as well as raw materials used primarily in the
manufacture of household goods.
2.1.2 Steinhoff International has been listed on the JSE since 1998. It has a
current market capitalisation in excess of R16 billion. For the financial year
ended 30 June 2004 Steinhoff reported over R10,5 billion in revenue, R1,1
billion operating profit and generated R1,5 billion cash from operations. At
31 December 2004 it reported a net asset value of over R7 billion.
2.1.3 The current structure of the Steinhoff group is illustrated on the press
release:
2.1.4 For management purposes the Steinhoff group identifies three regions,
namely southern Africa, the European Community (including the United Kingdom,
the German region, Benelux, Poland and Hungary) and the Pacific Rim. These
operations are owned via its two main operating subsidiaries, namely Steinhoff
Europe and Steinhoff Africa.
2.1.5 Steinhoff Europe houses all European and Pacific operations of the
Steinhoff group and consists of a network of trading, distribution and
manufacturing companies based in Central-Eastern Europe, Western Europe and
the Pacific region. Its products include both branded and non-branded
household goods and furniture which are sold at a wide range of price points
to retailers ranging from discount retailers, buying groups, mail order
companies and specialty stores in Europe, Australia and New Zealand.
2.1.6 Steinhoff Africa houses all the southern African operations wherein it
manufactures and sells furniture and other household goods, DIY and timber
products for the southern African market and for export, mainly to the UK and
USA. Steinhoff Africa is an important supplier to all of the large retail
chains in South Africa, operating at different price levels. Through its
shareholding in listed transport and logistics group Unitrans, Steinhoff
Africa has secured quality delivery of its diversified logistical requirements
in this region. Steinhoff`s acquisition of PG Bison in June 2004 will further
enhance existing synergies and accelerate growth opportunities, given PG
Bison`s position as the largest producer of particle board and decorative
laminates in southern Africa.
2.1.7 The Steinhoff group`s strategic objective is to strengthen its position
as a leading manufacturer and distributor of quality furniture and related
household goods. To achieve this strategic objective Steinhoff has developed a
business model for its long-term development while its growth strategy ensures
operating level execution in the short and medium term.
2.1.8 Steinhoff`s business model is based on the following:
- production in low-cost countries and distribution and sale into
developed countries;
- participation in most facets of the supply chain;
- third party sourcing.
2.1.9 The growth strategy of Steinhoff is based on:
- market share gains in key markets;
- product diversification and expanded ranges;
- higher margin branded products;
- short lead times and optimised logistics;
- enhanced efficiencies;
- geographical diversification;
- good customer relations.
2.1.10 Steinhoff conducts its operations in 15 countries around the
world. The group operates 98 manufacturing facilities and 28 distribution
facilities throughout Europe, Australasia and southern Africa. In total,
Steinhoff employs over 40 000 people, which makes it one of the largest
furniture groups in Europe and the biggest in southern Africa.
2.1.11 As part of its continued capital management programme, the
Steinhoff group wishes to raise cost-effective permanent capital by way of a
preference share issue. Net proceeds of the preference share issue will be
used to finance long-term assets of a capital nature where the investment and
funding structure reflect similar characteristics.
2.1.12 Accordingly, it has been resolved that Steinhoff Investment, a
wholly-owned subsidiary of Steinhoff International, issue and list R650
million of cumulative, non-redeemable, non-participating, variable rate
preference shares as detailed in this abridged pre-listing statement.
2.2 Prospects
2.2.1 The goal of the Steinhoff group`s business is towards value creation and
fulfilling its vision for a global multi-product company.
2.2.2 Steinhoff is experiencing a continuous phase of sustained growth,
brought about by organic growth, augmented by selected acquisitions and
building synergies between existing businesses and these new acquisitions. As
a result of these growth strategies, the Steinhoff group`s results have been
characterised by a return on equity consistently in excess of 20% for each of
the four years from 30 June 2000.
2.2.3 The funding raised in terms of the private placement will be utilised to
optimise the group`s capital structure as a definitive initiative in securing
the base for sustainable growth. Steinhoff`s track record for identifying
opportunities capable of delivering tangible growth to shareholders, the
adoption of its robust approach to developing markets, both locally and
internationally, the general bullish sentiment in the South African economy at
present, coupled with unprecedented consumer demand, all have contributed to
the Steinhoff group`s remarkable performance over the last 18 months. Indeed,
the group is poised to take full advantage of the favourable local prevailing
economic conditions and capitalise on recovery initiatives that are prevalent
elsewhere in the world. The preference share funding will contribute to
enhancing the group`s ability to unreservedly pursue such opportunities as
they present themselves.
2.2.4 The group recently concluded a transaction with Homestyle Group plc, a
United Kingdom retailer with an annual turnover of GBP 450 million and more
than 600 stores spread across the UK. This transaction, if approved by
Homestyle shareholders on 17 June 2005, will result in the Steinhoff group
acquiring a minimum interest of 45% and a maximum of 73,7% of Homestyle`s
enlarged equity capital. After this transaction Homestyle will be debt-free
and in a very favourable position to increase its trading margins. The
transaction also offers the opportunity to Steinhoff for substantial
incremental business to its manufacturing and sourcing activities.
3. DIRECTORS
The full names, ages, addresses and profiles of the directors of
Steinhoff Investment, who are all directors of Steinhoff International (save
for Mr S J Grobler, who is Company Secretary of Steinhoff International) and
are all South African residents, are set out below:
Full name Age Occupation Business Address
Dirk Emil Ackerman* 70 Independent non-executive 28 6th Street
director of Steinhoff Wynberg
International Johannesburg 2090
Stephanus Johannes Grobler 45 Company secretary of 28 6th Street
Steinhoff International Wynberg
Johannesburg 2090
Deenadayalen Konar # 51 Independent non-executive PKF House
director of Steinhoff 15 Girton Road
International Parktown 2193
Johannes Henoch Neethling
van der Merwe 45 Chief Financial Officer 28 6th Street
of Steinhoff International Wynberg
Johannesburg 2090
* Member of the Human Resource and Remuneration Committee of Steinhoff
International.
# Member of the Audit and Risk Management Committee of Steinhoff
International.
4.SHARE CAPITAL OF STEINHOFF INVESTMENT
4.1 Authorised and issued share capital
The authorised and issued share capital of Steinhoff Investment, before
and after the private placement, is set out below:
4.1.1 Before the private placement
R
Authorised share capital
101 000 000 ordinary shares of 0,5 cent each 505 000
495 000 000 cumulative, non-redeemable, non-participating
preference shares of 0,1 cent each 495 000
Issued share capital
12 700 000 ordinary shares of 0,5 cent each 63 500
Share premium 497 516
Total issued share capital and premium 561 016
4.1.2 After the private placement
R
Authorised share capital
101 000 000 ordinary shares of 0,5 cent each 505 000
495 000 000 cumulative, non-redeemable, non-participating
preference shares of 0,1 cent each 495 000
Issued share capital
12 700 000 ordinary shares of 0,5 cent each 63 500
6 500 000 cumulative, non-redeemable, non-participating
variable rate preference shares of 0,1 cent each 6 500
Share premium 650 491 016
Total issued share capital and premium 650 561 016
5. SALIENT FEATURES OF THE PREFERENCE SHARES
5.1 Salient terms
5.1.1 The preference shares are cumulative, non-redeemable, non-participating
and variable rate.
5.1.2 The rights attached to the preference shares can only be modified,
amended, added to or abrogated with the written consent of at least 75% of the
holders thereof or by way of a special resolution passed at a general meeting
of the preference shareholders at which holders of not less than 25% of the
preference shares are present in person or represented.
5.1.3 Each preference share will rank as regards to dividends and repayment of
capital on the winding-up of the company prior to the ordinary shares and any
other class of shares in the capital of the company not ranking prior to or
pari passu with the preference shares.
5.2 Voting rights
The preference shares are non-voting, save for the circumstances
prescribed under section 194 of the Companies Act. Preference shareholders
will only be entitled to vote during those periods when a preference dividend
or any part thereof, remains in arrears and unpaid after 120 days or when a
resolution of Steinhoff Investment is proposed which directly affects the
rights attached to the preference shares or the interests of the preference
shareholders.
5.3 Entitlements to dividends
5.3.1 Each preference share shall confer on the holder thereof, for each
dividend period, being the six-month periods ending 31 December and 30 June, a
preferent right to dividends (in priority to all other classes of shares, not
ranking pari passu with the preference shares, then in issue) calculated in
accordance with the following formula:
Dividend = R100 x (75% of prime divided by 365) x the number of days in the
dividend period.
5.3.2 The preference dividend is to be declared by no later than 120 days
after the last day of the applicable dividend period. Accordingly, it is
envisaged that dividends in respect of the six-month period ending 31 December
will be payable by the end of the succeeding April and that dividends in
respect of the six-month period ending 30 June will be payable by the end of
the succeeding October. The first dividend will be in respect of the period
commencing on the issue of the preference shares and ending on 31 December
2005, such dividend to be payable by the end of April 2006.
5.3.3 If a preference dividend is not declared by the company in respect of a
particular dividend period, the preference dividend shall accumulate and shall
accordingly become payable by the company in preference to payments to any
other class of shares in the company or ordinary shares in the capital of its
holding company. If any preference dividend is not paid on or before the
preference dividend payment date, interest shall accrue on such arrear
preference dividend at the prime rate calculated from the preference dividend
payment date, and shall be payable by the company to the preference
shareholder when the arrear preference dividend is paid.
6. DETAILS OF THE PRIVATE PLACEMENT AND LISTING OF THE PREFERENCE SHARES ON
THE JSE
6.1 Particulars of the private placement
- Subscription price per preference share with a par value
of 0,1 cent each R100
- Minimum Rand value of subscription per applicant acting
as principal R100 000
- Number of preference shares offered 6 500 000
- Amount raised in terms of the private placement R650 000 000
The preference shares rank in priority to any payment of dividends to
the holders of any other class of shares in the capital of the company or its
holding company not ranking prior to or pari passu with the preference shares.
An ordinary dividend will not be declared unless the preference dividend has
been declared. All preference shares rank pari passu with each other.
6.2 Private placement
Prior to the issue of the pre-listing statement, 6 500 000 preference
shares with a par value of 0,1 cent each were placed with select investors at
a subscription price of R100 per preference share thereby raising R650 000
000.
6.3 Listing of the preference shares on the JSE
The JSE has granted Steinhoff Investment a listing for 6 500 000
preference shares in the Specialist Securities - `Preference Shares` sector of
the JSE list, under the abbreviated name SHFINV-PREF (share code: SHFF and
ISIN: ZAE000068367), from the commencement of trade on Wednesday, 15 June
2005. Steinhoff Investment meets the requirements of the JSE in respect of the
requisite spread of preference shareholders, being a minimum of 50 public
preference shareholders, excluding employees and their associates, holding at
least 20% of the preference shares.
7. COPIES OF THE PRE-LISTING STATEMENT
7.1 This abridged pre-listing statement is a summary of the full pre-listing
statement and has been prepared and issued in relation to the private
placement and the listing of the preference shares. It contains the salient
features of the pre-listing statement dated 13 June 2005, which should be read
in its entirety for a full appreciation thereof.
7.2 Copies of the full pre-listing statement, in English, may be obtained
during office hours at the following addresses:
7.2.1 the registered office of the company: 28 6th Street, Wynberg, Sandton
2090;
7.2.2 the offices of the corporate adviser and sponsor of Steinhoff
Investment, PSG Capital: Building 8, Woodmead Estate, 1 Woodmead Drive,
Woodmead 2157; and
7.2.3 the offices of the transfer secretaries of Steinhoff Investment,
Computershare Investor Services 2004 (Pty) Limited: Ground Floor, 70 Marshall
Street, Johannesburg 2001.
8. COMPANY SECRETARY AND REGISTERED OFFICE
Stephanus Johannes Grobler BComm (Hons), LLB, 28 6th Street, Wynberg 2090
(PO Box 1955, Bramley 2018)
Telephone: (011) 445 3000
Facsimile: (011) 445 3094
Johannesburg
13 June 2005
Corporate adviser and sponsor
PSG CAPITAL
Legal adviser
TUGENDHAFT WAPNICK BANCHETTI AND PARTNERS
Date: 14/06/2005 07:00:18 AM
Produced by the JSE SENS Department
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