JOHANNESBURG – Retail giant Steinhoff International Holdings NV, which owns American mattress brand Sleepy's and a string of chains across Europe, said on Wednesday its chief executive has resigned amid an investigation into accounting irregularities.
Continue Reading Below
Shares in the company plunged more than 60% on Wednesday after it disclosed Markus Jooste's departure in a statement, more than halving the value of a company that had been worth more than $14 billion the day before.
German prosecutors in Oldenburg, Germany, who have jurisdiction over Steinhoff's Frankfurt-listed headquarters, launched an investigation in August into allegations that the company's management used off-balance sheet entities to hide losses in its operations and artificially pump up its valuation. Steinhoff did not respond to requests for comment.
Steinhoff has previously denied those allegations. On Wednesday, the company said it had hired accountancy firm PwC to conduct an independent investigation in light of what it said was new information relating to accounting irregularities. It didn't detail any specific issues. The company had been expected to release its results for the year ended Sept. 30 on Wednesday, but said it would now publish results when it was in a position to do so.
Steinhoff said it appointed Chairman Christo Wiese, one of South Africa's richest men, as executive chairman on an interim basis, and said he would conduct a detailed review of the business.
German prosecutors say they have focused on the suspicion that "inflated revenues flowed into company subsidiaries," according to Torben Björn Tölle, a spokesman for the Oldenburg prosecutor, in a statement. The suspect revenues came from "contracts through which subsidiary companies sold intangible assets or company shares, each for a sum in the three-digit millions (of euros), to alleged third parties that have close ties to the company, according to the investigation," Mr. Tölle said.
Continue Reading Below
In August, the Oldenburg prosecutor also said that it was investigating four current and former Steinhoff executives on suspicion of making "false representations in the balance sheet."
For Steinhoff, the German probe has clouded what had until recently been seen as an acquisition-fueled push into some of the world's biggest retail markets.
Steinhoff doubled down on Africa when it bought discount clothing retailer Pepkor in 2015 for about $5.7 billion at the time. Pepkor's Africa operations and Steinhoff's other African retail businesses now form the separately listed Steinhoff Africa Retail Ltd. or STAR.
Steinhoff International moved its primary listing to Frankfurt in late 2015, following other South African corporate giants such as Anglo American PLC and luxury-goods giant Cie. Financière Richemont SA, who also moved their primary listings elsewhere. Those companies all retain a secondary listing on the Johannesburg Stock Exchange.
Last year Steinhoff,agreed to pay $2.4 billion for Sleepy's owner Mattress Firm Holding Corp. The company also acquired British discount retailer Poundland Group PLC in 2016 for GBP597 million ($716 million).
The majority of Steinhoff's business is now in Europe, where it sells furniture and bedding through a number of brands, from Germany and Switzerland to Poland and Bulgaria. It also has operations in Australia.
Write to Alexandra Wexler at email@example.com, Zeke Turner at Zeke.Turner@wsj.com and William Boston at firstname.lastname@example.org
(END) Dow Jones Newswires
December 06, 2017 13:37 ET (18:37 GMT)