South Africa's Steinhoff considers sale of $1.4 billion stake to lift liquidity

South Africa's Steinhoff is considering selling stakes worth a combined $1.4 billion (1.1 billion pounds) in local companies PSG Group and KAP Industrial to help plug a liquidity gap at the retailer, two sources familiar with the matter said.

Steinhoff, the owner of more than 40 retail brands including Pepkor's Pep&Co, Conforama, Mattress Firm and Poundland, is fighting for survival after more than $14 billion was wiped off its market value last week following its disclosure of accounting irregularities and the exit of its chief executive.

The company has said it planned to raise around 2 billion euros ($2 billion) from the sale of non-core assets and the proceeds of debt repayments from its African unit Steinhoff Africa Retail, to fill a hole in its balance sheet.

"It cannot get any more non-core than their stake in PSG," a source in Johannesburg said. "It is on the table and so is the stake in KAP."

The likely sale of the stakes was corroborated by a second source based in Frankfurt, who said they were first on the list of possible divestitures to plug funding holes.

Steinhoff owns about 25 percent of PSG, a 60 billion rand ($4.40 billion) investment holding company, and 39 percent, or of diversified industrial group KAP Industrial, which is worth around 6.1 billion rand at current market prices.
Steinhoff, KAP Industrial and PSG Group declined to comment.

The Johannesburg source, who declined to be named because he is not authorised to speak to the media, also said the stakes would most likely be sold in chunks via a so-called accelerated book build to institutional investors.

Steinhoff said on Sunday it had called in turnaround specialist AlixPartners to help shore up its liquidity. It also hired U.S investment bank Moles & Co to help it prepare for a delayed meeting with lenders in London next week.