Deep fall after a long period of success: The story of Steinhoff

• A group with several companies early on

• Advance into South Africa

• Numerous restructurings

Trimmed for growth from the start

The “Bruno Steinhoff furniture representation and sales” was founded on July 1st, 1964 in Westerstede, a district town with 22,000 inhabitants in the north-west of Lower Saxony, by Bruno Ewald Steinhoff as an import company with a trading agency. According to the Controller Institute, the company, which specializes in importing furniture from what was then the Eastern Bloc, was supplemented in 1970 with the founding of the first upholstered furniture factory, and the range of activities was also expanded.

As early as 1980, the Steinhoff Group comprised a total of seven companies and began developing international activities. When the Berlin Wall fell, Steinhoff set about developing the new market for furniture production, established itself as one of the largest investors in the new federal states and took over eight production sites. The group quickly rose to become one of the most important upholstered furniture manufacturers on the market and initiated renewed growth by pushing production in Eastern Europe through ongoing plant foundations until 1996. By then, Steinhoff employed 5,000 people in 20 affiliated companies, reports the Controller Institute.

The trip to South Africa

In 1997, the group ventured into South Africa for the first time and merged with the South African part of the group of the German entrepreneur Claas Daun, who had built up one of the largest textile groups in Germany in neighboring Rastede since the late 1970s. This also made the foam and furniture manufacturer Gomma-Gomma part of the Steinhoff Group, for which Daun himself had worked for some time in South Africa. “Steinhoff Möbel” was founded in Cape Town, later known as “Steinhoff Africa”. “Steinhoff International Holdings Ltd” was then founded in 1998 in order to be able to carry the increasingly international structure of the group, according to the Controller Institute. In the same year, this company, which coordinated the business relationship between Steinhoff Germany, Steinhoff Europe and Steinhoff Africa, was also listed on the Johannesburg Stock Exchange.

Also in 1998, the South African Chartered Accountant Markus Jooste was appointed Executive Director for European operations, and in 2000 he was promoted to CEO of the holding company. Jooste had become Finance Director at GommaGomma at the age of 27 and had developed a close relationship with Claas Daun, who, according to the Controller Institute, was a kind of mentor to him. At that time, Steinhof was also actively diversifying the product portfolio and entering the electronics market, while also opening up the American market. In 2013, the group took over the kika/Leiner group, but the details of this process are now being examined very critically as part of the accounting scandal.

Restructuring measures

Around the same time, the group established contact with the South African lawyer and entrepreneur Christo Wiese, who, among other things, was the owner of various companies. Steinhoff took over his Pepkor clothing retail chain in 2014/2015, making Wiese the most important major shareholder at Steinhoff and also being appointed chairman of the supervisory board, reports Controller Institut. The South African supermarket chain Shoprite, which was also controlled by Wiese, remained in Wiese’s majority ownership, but the plan was to incorporate this company into the Steinhoff Group as well. However, this failed due to the resistance of several co-owners.

Aside from these processes, the group was also restructured in several other areas. For example, the initial listing was moved from the Johannesburg stock exchange to the Frankfurt stock exchange. In 2016, Steinhoff International Holdings NV (based in Amsterdam) was listed in the MDAX. According to the Controller Institute, the share price had tripled between the end of 2012 and the beginning of 2016 prior to this. This event represented the last high point in the history of the group before the accounting scandal.

The accounting scandal

Already at this time, however, there were increasing indications of an impending catastrophe. According to Manager Magazin, the Oldenburg public prosecutor’s office had already initiated investigations against Steinhoff in the summer of 2015 on suspicion of balance sheet manipulation and document forgery. The law enforcement officers had the suspicion “that excessive sales have flowed into the balance sheets of group companies” that are connected to contracts that have a three-digit million volume.

Raids unearthed contracts signed by XXX Lutz main owner Andreas Seifert, which date from a time when negotiations for a joint expansion of the two companies were being conducted, but these failed. Seifert denied knowledge of these contracts and filed a complaint for forgery.

In response to the publication of this information in mid-2017, Steinhoff’s share price plummeted. Investigations were initiated against CEO Markus Jooste as well as against other Steinhoff managers, but have not come to any conclusions to date. When Jooste clashed at the end of the year with a group auditor from Deloitte who, despite Jooste’s urging, refused to agree to the release of unaudited numbers, the CEO was forced to step down.

Jooste was forced to admit to “irregularities in the company’s accounting” and major mistakes in the past, since then he has completely withdrawn from the public eye. Christo Wiese took over Jooste’s functions for a short time, but he also resigned from all offices only a short time later.

Thomas Weschle / Editor finanzen.net

Image sources: Steinhoff International Holdings NV