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Steinhoff plans to sell 17% stake in KAP Industrial Holdings

Steinhoff International Holdings NV, the South African retailer facing a cash crunch, said March 13 that it planned to sell a roughly 17% stake in diversified logistics, industrial and chemical company KAP Industrial Holdings Ltd. in a share placing that could raise as much as 3.83 billion South African rand before fees.

Steinhoff, which has financial issues stemming from its disclosure of accounting irregularities, said in a statement that proceeds would be used to settle "certain debt obligations."

The Stellenbosch-based company said it would immediately launch an accelerated book building of up to 450 million shares in KAP, which has activities spanning the supply chain, passenger transport and automotive component industries. Shares will only be offered to qualifying institutional investors.

Pricing and allocations would be announced as soon as possible following closing of the book, Steinhoff said. Standard Bank of South Africa Ltd. and Investec Bank Ltd. are serving as joint book runners.

After the deal is completed, Steinhoff's stake in KAP, which it holds through an indirect wholly owned subsidiary, will fall to approximately 26% from 43%.

The sale is the latest effort by Steinhoff to shore up its balance sheet since its bank lenders suspended or withdrew credit after the company reported Dec. 6, 2017, that it had appointed an independent auditor to probe its accounts amid apparent irregularities. Steinhoff — which owns Mattress Firm in the U.S., the operator of the Sleepy's brand — has seen its share price collapse since then, putting a squeeze on its finances.

The company, which also owns U.K. general merchandise retailer Poundland and household goods seller Conforama in continental Europe, previously offloaded stakes in South African investment holding company PSG Group Ltd. and online platform Showroomprive as it seeks to strengthen its balance sheet.

In early morning trading in Johannesburg, KAP shares traded down 1.7% at 8.50 rand.

As of March 12, US$1 was equivalent to 11.84 South African rand.