Steinhoff International Holdings N.V. : Decision of the Enterprise Chamber of the Amsterdam Court of Appeal

Steinhoff - Decision of the Enterprise Chamber of the Amsterdam Court of Appeal

Steinhoff International Holdings N.V. (the "Company" and with its subsidiaries, the "Group")

Further to the Company's announcement of 22 January 2018, the Enterprise Chamber of the Amsterdam Court of Appeal (the "Enterprise Chamber") last night issued its decision in respect of proceedings brought by OM-Handels GmbH and MW Holdings GmbH, entities controlled by Dr. Andreas Seifert (the "Seifert Entities"), a former joint venture partner of the Group (the "Dutch POCO Proceedings").

Background

The Dutch POCO Proceedings relate to the appropriate treatment under International Financial Reporting Standards ("IFRS") regarding the consolidation of POCO Einrichtungsmarkte GmbH ("POCO") in the Company's 2016 consolidated financial statements ("2016 Accounts").

The Dutch POCO Proceedings follow a dispute relating to the ownership of POCO, which is the subject of ongoing legal proceedings in Germany (the "German POCO Proceedings").

The Company's 2016 Accounts were prepared on the basis that the Group owned 100% of POCO, given the Company's position that the 50% interest of the Seifert Entities in POCO should be redeemed due to certain actions by the Seifert Entities. Consistent with this and in line with German legal requirements, the payment to be made in consideration for the redemption of the Seifert Entities' 50% interest in POCO was included as a payable liability in the 2016 Accounts, to be paid once the German POCO Proceedings have been finalised.

The Dutch POCO Proceedings were brought by the Seifert Entities on the basis that, given the dispute regarding the Company's assertions in the German POCO Proceedings, the Seifert Entities also disputed the IFRS accounting treatment of the consolidation of POCO in the 2016 Accounts. The Seifert Entities sought orders from the Enterprise Chamber requiring the Company to amend the 2016 Accounts, mainly to: (i) deconsolidate POCO; and (ii) change the explanatory notes to recognise the Seifert Entities' 50% shareholding in POCO.

Ruling

The Enterprise Chamber in its judgement has ruled that the Company was correct to consolidate POCO as a controlled interest in its 2016 Accounts. However, it has ordered that the Company amends the 2016 Accounts (and provides in future financial statements, where applicable) as follows: (i) the Company's consolidation treatment of POCO be changed from a 100% controlling interest to a 50% controlling interest; and (ii) it be recorded that the Seifert Entities hold a 50% non-controlling interest in POCO. The Enterprise Chamber also requires the Company to revise the related contingent liabilities explanatory note to the 2016 Accounts, removing reference to the payable liability to the Seifert Entities, stating that the Company has consolidated POCO as a 50% controlled interest and that the German POCO Proceedings are ongoing.

The Company is in the process of studying the judgement (including whether it provides grounds for appeal) and considering the impact of the decision on the Group's accounts and will update shareholders in due course.

Status of the German POCO Proceedings

It should be noted that whilst the judgment of the Enterprise Chamber has ruled in relation to the Group's accounting treatment for POCO, the ongoing German POCO Proceedings will in due course determine the parties' respective ownership interests in POCO.

Shareholders and other investors in the Company are advised to exercise caution when dealing in the securities of the Group.

Stellenbosch, 20 February 2018