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SHF
SHF
SHF - Steinhoff International Holdings Limited - Steinhoff International
Holdings Limited announces definitive agreement with PPR S.A to acquire
Conforama Holding S.A. and withdrawal of cautionary announcement
Incorporated in the Republic of South Africa
Registration Number: 1998/003951/06
Share Code: SHF & ISIN: ZAE000016176
31 January 2011
STEINHOFF INTERNATIONAL HOLDINGS LIMITED
("Steinhoff")
STEINHOFF INTERNATIONAL HOLDINGS LIMITED ANNOUNCES DEFINITIVE AGREEMENT WITH PPR
S.A. ("PPR") TO ACQUIRE CONFORAMA HOLDING S.A. ("CONFORAMA") AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
1. Introduction
Steinhoff shareholders are referred to the announcement published by Steinhoff
on the Securities Exchange News Service of the JSE Limited on 9 December 2010,
relating to Steinhoff entering into exclusive negotiations with PPR to acquire
Conforama, a leading European retailer of furniture and household goods.
Steinhoff is pleased to announce that, following the successful consultation
with personnel representative bodies of the Conforama group as required under
French law, Steinhoff has reached an agreement with PPR to acquire at least
8,367,629 shares in Conforama, constituting 99.98 per cent of the entire issued
share capital of Conforama, for a cash consideration of EUR 1,207 million (the
"Transaction"). The remaining 0.02 per cent of the issued share capital of
Conforama is held by third parties other than PPR and its affiliates, and
includes a number of unclaimed shares.
2. Description of Conforama
Conforama operates a network of 236 stores, of which 186 are in France
comprising 161 directly operated stores and 25 franchises. In addition,
Conforama operates 50 stores in six other European countries: 18 in Spain and
Portugal, 15 in Italy, 13 in Switzerland, three in Croatia and one in
Luxembourg.
Conforama`s core product lines comprise furniture and white goods with grey and
brown goods supporting customer traffic. Conforama employs a multi-style product
strategy and carries a large product range, approximately 80 per cent of which
are immediately available in store. In addition, Conforama offers products in
the higher margin decoration segment, as well as providing warranty and after-
sales services.
Furthermore, Conforama sells its products through its online sales channel. The
online sales channel is operated through three websites in France
(www.conforama.fr), Italy (www.conforama.it) and Switzerland (www.conforama.ch)
via a "cash and carry" model which is supported by Conforama`s physical store
network. Conforama recently acquired La Maison de Valerie, in order to
strengthen its online sales channel. La Maison de Valerie is a mail order brand
specialising in homeware: furnishings, interior design, household electrical
goods, hi-fi and video, DIY and gardening.
A new CEO and executive management team was appointed at Conforama in the second
half of 2008. Shortly thereafter, the new management implemented certain
business improvement strategies that resulted in substantial once-off
restructuring costs, for the purposes of repositioning Conforama to resume its
growth and development in the markets which it serves. These restructuring costs
are included in their entirety in the pro forma financial effects set out in
paragraph 6 below. The related benefits are, however, already evident from the
historical performance of Conforama as announced by PPR subsequent to 2008 and
as summarised in paragraph 7 below.
3. Rationale for the Transaction
Steinhoff was founded in 1964, and listed on the JSE Limited ("JSE") in 1998.
Steinhoff is a holding company invested predominantly in household goods and
diversified related industries. Steinhoff is one of the largest integrated
furniture and household goods suppliers in Europe. Steinhoff`s growth in Europe
is supported by its strategy to supply selective external retailers within
Europe and add group-owned retail footprints to the existing manufacturing and
sourcing supply chain in Europe. Through Steinhoff`s acquisition of Homestyle
plc (June 2005) and European Retail Management in continental Europe, the
group`s retail offering is well represented in the UK and Germanic countries,
but the group has no direct retail presence in France (the fourth largest
furniture market in Europe) where Steinhoff currently only operates as a
supplier. The integrated business model provides the group with a competitive
supply advantage particularly in the mass-market consumer segments.
Conforama will give Steinhoff immediate access and scale in the EUR 9.3 billion
(FY 2009) French furniture retailing market. Conforama`s presence in continental
Europe (particularly in Switzerland, Portugal, Spain, Italy and Croatia) will be
highly complementary to Steinhoff`s existing retail geographic footprint, and
established supply chain globally.
In addition, Steinhoff`s core retail expertise resides in its premium value-
orientated proposition similar to that of Conforama and as such the combined
business will benefit from the complementary product offering, customer profile,
marketing efforts and supply chain expertise.
The increased scale inherent in the enlarged business will result in cost
savings and increased knowledge and leverage.
4. Transaction Consideration and Funding
The transaction consideration will be financed from a mix of available cash
resources, acquisition debt facilities and equity that will include a
combination of up to 137 million reserved ordinary shares to be vendor placed
and unlisted perpetual preference shares. In addition, Steinhoff will procure
that Conforama refunds PPR`s working capital facility on closing.
The transaction consideration is based on a warranted audited EBITDA of EUR 200
million for the year ended 31 December 2010.
5. Articles of Association of Conforama
The Transaction will result in Conforama becoming a subsidiary company of
Steinhoff and accordingly its articles of association will be amended to conform
to Schedule 10 of the JSE Listings Requirements.
6. Pro Forma Financial Information
The pro forma financial effects on Steinhoff as at and for the year ended 30
June 2010 have been prepared in accordance with the JSE Listings Requirements.
The pro forma effects incorporate the unaudited results of Conforama for the 12
months ended 30 June 2010. Steinhoff is satisfied with the quality of these
results of Conforama, as extracted from the unaudited six months accounts to 30
June 2009, the audited accounts for the year ended 31 December 2009 and the
reviewed results for the six months ended 30 June 2010.
The pro forma financial effects have been prepared for illustrative purposes
only and, because of their nature, may not fairly present Steinhoff`s financial
position, changes in equity, results of operations or cash flows after the
Transaction.
The Board of directors of Steinhoff is responsible for the pro forma financial
information.
Financial impact of the transaction:
Steinhoff Transaction Pro forma % change
after the
Transaction
Basic headline earnings per 254.6 (25.6) 229.0 (10.1)%
share (cents)
Diluted headline earnings per 244.2 (22.1) 222.1 (9.0)%
share (cents)
Basic earnings per share 251.5 (113.7) 137.8 (45.2%)
(cents)
Diluted earnings per share 241.4 (101.0) 140.4 (41.8%)
(cents)
Net asset value per ordinary 1,657 1,695 2.3%
share (cents)
Shares in issue (net of 1,408 137 1,545
treasury shares) (million)
Weighted average shares in 1,376 137 1,513
issue (million)
Weighted average shares in 1,554 137 1,691
issue (million) (diluted)
* The "Pro-forma after the Transaction" basic and headline earnings per share
numbers include non-recurring items, including restructuring costs, of EUR
72 million,
** In addition, the "Pro forma after the Transaction" basic earnings per
share numbers are stated after capital items of Conforama, comprising
mainly impairment of goodwill of EUR 125 million.
Notes:
(i) The pro forma financial effects calculations are based on the following
assumptions:
- that the Transaction had been effective on 1 July 2009 for earnings per
share and headline earnings per share purposes and on 30 June 2010 for net
asset value per share purposes;
- the unaudited results of Conforama for the 12 months ended 30 June 2010 are
based on and derived from the three sets of accounts of Conforama mentioned
above;
- include the effects of non-recurring items of EUR 72 million and goodwill
impairment of EUR 125 million for Conforama incurred during the 12 months
ended 30 June 2010;
- the issue by Steinhoff of 137 million vendor consideration shares;
- an average after-tax funding cost applicable to the banking facilities
procured for the purposes of the Transaction; and
- a provision for Steinhoff`s transaction costs of EUR 14 million.
7. Additional Management Financial Information on Conforama
The historical performance of Conforama as announced, as part of PPR`s results
from time to time, is set out in the table below:
For the year ended 31 December
2009 2008 2007 2006 2005
Euro`m Euro`m Euro`m Euro`m Euro`m
Revenue 2,928 3,168 3,310 3,254 3,137
Recurring operating 125 118 168 183 177
income
Recurring EBITDA 198 183 230 243 237
PPR furthermore announced that, for the six months ended 30 June 2010, Conforama
generated:
- sales of EUR 1,414 million (June 2009: EUR 1,331 million);
- recurring operating income of EUR 52 million (June 2009: EUR 31 million);
and
- recurring EBITDA of EUR 83 million (June 2009: EUR 63 million).
As at 30 June 2010, Conforama had net assets at historical values of EUR 449
million.
The results above, as announced by PPR are stated before non-recurring items of
EUR 72 million, goodwill impairment of EUR 125 million and Steinhoff`s provision
for transaction costs of EUR 14 million. However, the effects of these non-
recurring costs and capital items are included in their entirety in the pro-
forma numbers set out in paragraph 6 above.
The directors of Steinhoff consider it meaningful to also provide shareholders
with the effects that exclude the EUR 72 million non-recurring items below.
The Transaction, had it been effective on 1 July 2009, would have had the
following effects on Steinhoff`s headline earnings and diluted headline earnings
per share, before taking into account the effects of the EUR 72 million non-
recurring items:
- basic headline earnings per share would have increased by 7.8% from 254.6
cps to 274.4 cps; and
- diluted headline earnings per share would have increased by 7.6% from 244.2
cps to 262.7 cps.
8. Conditions to closing
The Transaction remains subject to the fulfilment of, inter alia, the following
conditions, by no later than 30 June 2011:
- Steinhoff shareholders, in general meeting, passing the resolutions
required to approve and implement the Transaction; and
- obtaining of the appropriate authorisations or determinations from the
relevant competition authorities in Europe.
9. Shareholders` support
As stated in the announcement of 9 December 2010, in order to procure the
exclusive negotiations with PPR, Steinhoff has secured the support of holders of
53 per cent of its ordinary shares for this transaction.
10. General meeting of Shareholders and Documentation
A Circular containing details of the Transaction, including a notice convening a
general meeting and forms of proxy for the general meeting will be posted to
Steinhoff ordinary shareholders in due course.
The general meeting will be convened for the purposes of seeking shareholders
approval in terms of the JSE Listings Requirements.
11. Withdrawal of Cautionary Announcement
Shareholders and convertible bond holders of Steinhoff are advised that as a
result of this announcement, caution is no longer required to be exercised when
dealing in Steinhoff`s securities.
Johannesburg
31 January 2011
Financial advisors to Steinhoff
Citigroup Global Markets Limited
The Hongkong and Shanghai Banking Corporation Limited - Johannesburg Branch
(HSBC)
Royal Bank of Scotland International Limited
South African investment bank to Steinhoff
Standard Bank
Financial advisor to Steinhoff Europe
Bank of America Merrill Lynch
French legal advisor to Steinhoff
Gide Loyrette Nouel A.A.R.P.I.
South African legal advisor to Steinhoff
Cliffe Dekker Hofmeyr Inc.
Reporting accountants to Steinhoff
Deloitte & Touche, Registered Auditors
Reporting accountants in relation to Conforama
KPMG Inc
Transfer secretaries to Steinhoff
Computershare Investor Services (Proprietary) Limited
JSE sponsor and lead JSE transaction sponsor to Steinhoff
PSG Capital (Proprietary) Limited
Joint JSE transaction sponsor to Steinhoff
Citigroup Global Markets (Proprietary) Limited
Date: 31/01/2011 17:09:01 Produced by the JSE SENS Department.
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