THE BOTTOM LINE
Jooste: How can you sleep when your beds are burning?
Then-Steinhoff CEO’s decision to vastly overspend on Mattress Firm in 2016 deserves intense scrutiny
Former Steinhoff CEO Markus Jooste’s statement in parliament last month that the decision to buy Mattress Firm in September 2016 was not, in retrospect, a good one was a bit of an understatement.
The bedding company, which cost $2.4bn and came with $1.4bn debt, has been dogged by bankruptcy rumours for the past several months.
While Mattress Firm has never been directly linked to the “accounting irregularities” that prompted the December 2017 collapse in the Steinhoff share price, it’s to be hoped that the PwC investigation into those irregularities will touch on this, the last big deal that the global retailer signed off on.
If not PwC, then perhaps one of the class actions launched by shareholders will shed light on why the Steinhoff management and supervisory board unanimously agreed that paying a 115% premium to the Mattress Firm ruling share price was such a good idea.
In their defence it has to be said that the deal was announced when, despite growing concerns about the high-profile falling out with Jooste’s former partner, many in the investment community still believed he was an excellent deal maker and could extract value from even the most overpriced of assets.
Reading analysts’ comments in the context of what has happened since December 2017 is a sobering experience. It’s not only that the Mattress Firm purchase was overpriced but in September 2016 it was in the midst of its own buying spree and had added 1,500 stores in a few short years.
The buying didn’t stop with the Steinhoff deal. In May 2017 Mattress Firm spent an undisclosed sum to take control of Sherwood Bedding, whose founding family once owned one of the largest mattress manufacturers in SA.