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Steinhoff to sell Kika/Leiner business for 'nominal' sum

Steinhoff International Holdings NV, the South African retailer roiled by an accounting scandal, said June 15 that it reached an agreement to sell its Kika/Leiner business in Central and Eastern Europe to Austria's Signa Holding GmbH for a "nominal" sum.

The operator of Sleepy's in the U.S., Poundland in the U.K. and Conforama in continental Europe said in a statement that it opted to sell Kika/Leiner's operating companies and property holding companies after failing to replace credit insurers to the business' suppliers, which had withdrawn cover at the beginning of June.

Steinhoff, based in Stellenbosch, said Kika/Leiner was loss-making and had placed "significant cash demands" on the group. Any turnaround would have required a considerable amount of new investment over a number of years, it added.

The withdrawal of support from credit insurers had placed "significant further liquidity constraints" on the Kika/Leiner business, which in recent days translated into a weakening in customer confidence, the company said.

In parallel with its attempt to re-establish credit insurance cover, Steinhoff explored the possibility of a sale of Kika/Leiner, a furniture retailer with about 70 stores, 50 of which are in Austria with the others in Hungary, the Czech Republic, Slovakia and Romania.

Steinhoff said it accepted a conditional offer from Signa, which included a "nominal" consideration for the Kika/Leiner operating companies. The cost of the Kika/Leiner property holding companies would be based on an agreed enterprise value, subject to certain adjustments, it added.

Privately owned Signa had reserved the right to undertake due diligence in regard to the operating companies until June 19 and the right to terminate the acquisition of the property holding companies to the end of July. Closing is expected to take place in September.

Signa, a real estate investment company with holdings in retail, said in a statement to S&P Global Market Intelligence that in the weeks to come, it would draw up with Kika/Leiner's management a "comprehensive and far-reaching concept for restructuring and setting the course for the future."

"After carrying out a careful analysis, we are absolutely certain that the company can be put back on its feet and be successful once again," Stephan Fanderl, managing director of Signa Retail, said in the statement. Kika/Leiner is its first venture in the brick-and-mortar sector in Austria.

Steinhoff's lenders have suspended or withdrawn credit since the company reported in December 2017 that it had uncovered apparent accounting irregularities and launched an investigation. Since that initial disclosure, its Frankfurt-listed shares have lost more than 95% of their value, erasing more than €12 billion in market capitalization and leading to a flurry of lawsuits.

The company has been forced to sell assets to shore up its balance sheet, and has also said it needed to restate earnings for fiscal years 2015 and 2016.