If Steinhoff’s contractual claimants such as Christo Wiese-related entities and GT Ferreira were treated in the same manner as the thousands of shareholders who bought their shares in the market, Wiese’s proposed payout would be reduced from R7.9 billion to R1 billion and Ferreira’s from R421 million to R29 million, says a party acting on behalf of around 20% of Steinhoff’s shareholders.
Dublin-based Hamilton, which is managing a class action case on behalf of major institutional investors such as Ninety One, Allan Gray, Old Mutual, Coronation and Sanlam, has slammed the proposed settlement agreement as unfair and discriminatory.
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In a letter sent to its Steinhoff clients last week, Hamilton said it is continuing to resist the settlement proposal and is also continuing its active litigation strategy in the Netherlands and South Africa.
Hamilton challenges Steinhoff’s rationale for dividing the claimants into market purchase claimants (MPCs), who comprise the majority of Steinhoff shareholders, and contractual claimants (CCs) such as the Wiese-related entities and former banker Ferreira.
Steinhoff then uses different mechanisms to calculate the two categories of claims in a manner that benefits the CCs and discriminates against the MPCs, says Hamilton.
It notes that claims by Wiese’s Thibault “are recognised as being for 92% of the full purchase price of the shares and the claims of GT Ferreira and other contractual claimants are recognised at 94% of the full acquisition price”.
By contrast, instead of also being considered as a percentage of the full purchase price, all MPC claims are subjected to a so-called “inflation” loss methodology says Hamilton.
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It goes on to describe what must have been an immensely complex exercise.
“Under this method, economists briefed by Steinhoff have given an opinion of how much the share price was overvalued on each day between March 2009 and December 2017 as a result of Steinhoff’s misconduct.
The claim value of MPCs is limited to this inflation amount.
The inflation figure proposed by Steinhoff for each day ranges between 1% and 81% of the closing price on each day.
On an average day, the inflation figure is only 40% of the closing share price.”
Hamilton says if the CCs’ claims had been subjected to the same process they would have been valued at a smaller sum.
For example, Thibault’s claim (as a CC) was valued at R31.8 million; had it been valued in the same way as the MPCs it would have been reduced by 48% to R15.4 million.
Likewise, Ferreira’s claim was valued at R1.1 billion but would have been reduced by 40% to R437.9 million if subjected to the “inflation” loss methodology.
Steinhoff says its inflation loss methodology is a recognised basis of assessing the quantum of claims of class action securities claimants and allocating settlement consideration among them.
“Steinhoff considers it the appropriate approach to use here,” it says. It defends the different basis of allocations on the grounds that the CCs assert claims based on direct dealings with Steinhoff, which culminated in a contract for the acquisition of shares.
“Such claimants assert legal entitlements to rescind or cancel contracts on the alleged basis they were entered into on the basis of misrepresentations by Steinhoff’s representatives in pre-contractual negotiations and seek to claim back from Steinhoff the consideration paid for the shares,” says Steinhoff.
The methodology underpinning the CCs’ allocations reflects the legal nature of the CCs’ claims, it adds.
This article first appeared on Moneyweb and was republished with permission.
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