South Africa: Steinhoff Surges After Subsidiary Pepco Targets €5.8-Billion Market Cap for Warsaw IPO

analysis

Steinhoff's shares rallied to their highest since mid-February after indicative pricing for its European subsidiary came in at the top end of expectations.

Shares in Steinhoff International rose as much as 8.4% on Wednesday, 5 May, to their highest in almost three months, after it said it was going ahead with the listing of its Pepco Group subsidiary on the Warsaw Stock Exchange on 26 May.

If successful, it will raise more than €1-billion (R17.3-billion) for its portion of the stock that's going on sale, providing much needed relief to its overstretched balance sheet.

The initial public offering (IPO) of Pepco shares will allow Steinhoff to repay expensive debt as it continues to reel from the accounting irregularities uncovered in 2017.

It also has to stump up for a proposed €943-million settlement with aggrieved shareholders who lost out due to the subsequent collapse in its share price. This will be settled with a combination of cash and shares in local subsidiary, Pepkor Holdings.

Pepco, previously called Pepkor Europe, is aiming for a price range of between €8.35 and €10.11 for its stock, valuing the discount retail conglomerate at between €4.8-billion and €5.8-billion (R83-billion and R100-billion). Previous market estimates put its...

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