As the entrails of the corrupt Steinhoff empire become exposed, bruised investors are realising how little defence they have against a sociopathic CEO supported by crooked auditors. But spare a thought for Braam van Huyssteen, his CEO Bernard Mostert, and Tekkie Town which invested two and a half decades building the business from a single store in Mossel Bay. As Mostert explained on this week’s episode of Rational Radio, their initial asking price of R4.5bn was chiselled down to R3.3bn because of greater potential upside – but when the dust cleared, all they have left are relatively worthless shares and a long legal fight to get their company back. We were duped, Mostert admits. Yet his colleague Van Huyssteen has forgiven the man who did it the duping. A fascinating discourse. – Alec Hogg
Essentially what had happened was that Braam van Huyssteen took R20,000 which he borrowed from his family. He turned that R20,000 into a business that we had sold a minority stake in 2013 – 2014 to Actus. The Actus valuation at the time was roughly about R1.56bn, if I remember correctly. We marched on and then Braam developed a love for horses through his daughter’s showjumping career and crossed over into the racehorse industry and there he met Markus and I think that was, in hindsight an ill-fated meeting because that changed our path in many ways.
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They say that race horses are expensive but my goodness your colleague Braam has found out the hard way. From your perspective when did you get involved?
I’ve known Braam since I was 11. I’m now 43. We used to play golf together for Mossel Bay town league team and he used to come and pick me up on Saturday morning from my parents home and we would play league golf. We had these wisdoms in golf, let’s make three putt, which essentially meant “avoid the basics”. In hindsight one of the basics that we missed “never sell a highly cash generative profitable business that you have full control of.” Truth be told Actus, who was required to exit the transaction in the first step of the transaction because they couldn’t hold Steinhoff shares in terms of the investment mandate. So they had to settle for a cash amount and at first they wanted north of R4.5bn. So they were negotiated down by the Steinhoff team and I think that’s one of the things that really hasn’t surfaced, is that the asking price for the business by the investment partners was a lot higher.
Actus of course are private equity so they know exactly what the value is. But they agreed on R3.5bn. They sold out, they got cash. One of the few people to walk away from a Steinhoff deal with money in their pocket. Do you have Steinhoff shares?
Yes, what had happened at the time, Marsus said we’ve bought PEPKOR from Christo and Brait, and PEPKOR is a brilliant business in the white label space, but they have this basket of speciality stores which were struggling. Our business was a business where we intended that every single store should generate roughly R1m EBITDA after it reaches a maturity point. We had achieved this for a period of seven consecutive years. It always was the singular goal that we chased. We wanted to net an EBITDA number of 22% and we did that. People told us, certainly the Steinhoff team, not only Markus, although he was at the front of it, but many Steinhoff people told us this is a brilliant business. So the proposal was: “Exchange your business for shares in our business. We will give you custodianship of our speciality stores because they seem to be in your wheelhouse, businesses like Shoe City. After three years when you’ve put a result on the board, the shares will be worth significantly more.” Not that there was a value but then also on top of that the hard and fast metric around an earn out would be paid and that was based on the EBITDA achievement that we would then have in the collective business.
Ground Zero, if I can call it that, is the fact that Steinhoff failed to publish its results. Then Markus resigned and the implosion happened. Then the allegations and the wrongdoing started to surface. We had already taken control of speciality. We had one full quarter behind us, we had momentum in that business and it was doing well. We enjoyed working there during that period. Then the first signs of trouble, Braam was appointed as the head of PEPKOR property division. The reason for that, he is fanatical about property. It is the second or first biggest cost on most retailers income sheet, after or alongside people and Braam always said that property is a death trap, so let’s negotiate around this. So they gave him the responsibility for that because, and I humbly say that Tekkie Town built up an incredible lease schedule. So Braam was appointed Head of Properties for PEPKOR. With Marcus and Ben gone, Leon was now in charge. He called a meeting with Braam and said he was too entrepreneurial for Steinhoff, that he didn’t fit in this corporate structure. In hindsight I wish that didn’t happen because Braam was willing to give his all to make that business better. And, indirectly through his holding with Steinhoff, he was the single largest shareholder as an executive within PEPKOR. He said let’s put our heads down and let’s focus on what we can get out of this.
The real story here is that you had all these shares which were once worth, taking the total purchase price, R3.3bn. Now worth R35m, your business is gone and you are left with this worthless stock. What does one do in a situation like that. Excepting see the best lawyers you possibly can.
We did two things, although for the first I can’t speak for all my colleagues because I don’t know how all of them handled it personally, but I found sanity in doing one thing every day. I made a list of people that I messaged just to make sure that there wasn’t a suicide. I think that there was suicides in 2008 during the financial crash. Tragedies happen and people die, so I messaged people to make sure they were OK. It was an interesting time. It’s also interesting to see who stays in touch today, and I say that with a wry smile. But the second thing we did is a day after the event, we went to the offices of Webber Wentzel and we said we want to ensure that we start the proceedings to have our business returned to us because clearly we have been duped. Around August some of us decided we would start over and started Mr. Tekkie. We now have twenty eight stores today. You know more than most people understand starting over. It’s a difficult thing to do but it’s fun and there’s priceless memories. We also look forward to having our business back one day and we’re building it so that Tekkie Town and Studio 88 don’t compete with one another. It also looks to me that the public supports the validity of our claim and also the judgment by Judge Erasmus last week in the Western Cape High Court. But we’ve had no approach or engagement with Steinhoff. I had quite an aggressive narrative from PEPKOR trying to shut down our current business and trying to fight us. That is a bit ironic to us because the PEPKOR management are suing Steinhoff for fraudulent misrepresentation that happened in a case two years before our case happened. So ” die deler is so goed soos die steler”. Which is an Afrikaans saying that says the buyer is as guilty as the thief.
It sounds extraordinary. We did have a what I would describe as a usually reliable source writing to us to say that Braam van Huyssteen remains very close to Markus. That he defended Markus on radio interviews and this source went so far as to say that Markus’ Bentley was seen outside Braam’s Fancourt property on regular occasions. Now those are pretty heavy allegations.
This is obviously something that is either spun as a story or presented as a narrative but the truth is Braam has been in the media where he said that two or three days after Markus’s resignation, Markus came to him in person after he had sent Braam a message that he would not be able to forgive Markus for what he had done to Braam. Braam replied to Markus, that if Marcus looked him in the eye, and asked for forgiveness, then Braam would forgive him as he didn’t want to move forward in bitterness and a quest for vengeance. Braam also said he was wise enough to understand that Markus could not have acted alone. So Markus at that stage asked Braam for forgiveness, and make of that what you will.
They have stayed in touch. I wouldn’t say that they are extraordinarily close but certainly the concept of Markus’ Bentley parked outside the Fancourt property is not true because Braam himself doesn’t live in Fancourt anymore, he has spent only about 15 days there so that’s obviously just a rumour that’s juicy. He been has in touch with Markus. Leon is standing firm and holding fast to a defrauded business, he forgives him too.
Wow. That is extraordinary generosity of spirit. But in a cold hard financial world like Johannesburg, people will say he is trying to hide something. Unfortunately that’s the way the human psyche works. Is he really that forgiving?
I must say he is. I’ve known him all my life and it’s been a privilege and I can say categorically that he is that forgiving. Not all of us are, we all want justice, especially in today’s society. I myself can take a lot from Braam’s attitude. We walked away from this alive and how we react to it is going to define us. I am amazed at this concept, that one could be this forgiving, but he still wants his business back and clearly there’s no amount of forgiveness that is going to make good on the fact that he’s lost his life’s work. Thats why we’ve got a legal channel and a court system. Clearly the momentum and the narrative in that respect is very firmly in our case and also in the case of everyone else who has a claim against Steinhoff because everyone has been defrauded, and an environment has been set up in which we could be defrauded.
I’m sure there are lots of people in Stellenbosch who are shaking their heads when they listen to that part of it. The one question on the relationship between Braam and Markus Jooste right now that has to come out like a red flag is in the open letter to the PEPKOR CEO Leon Lawrence. Braam said he wants to see the full PWC report. The whole thing. Markus’s court papers earlier this month said he also wants to see the full PwC report. Are the two of them working together perhaps?
No, I can categorically say that is not true. The whole country wants to see the full PWC report and I think it will get us to an outcome a lot quicker and it’s regrettable that it’s not published. But there is no form of cooperation at all with Markus or anyone else who has been implicated or anyone else who is still to be implicated.
