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Cape Town - Seardel, the clothing and textile conglomerate now controlled by empowerment giant HCI, is taking legal action against former directors over the alleged inappropriate purchasing of luxury vehicles.
This emerged at Seardel's annual general meeting on Wednesday, and follows hot on the heels of Fin24's report on Monday that the company was set to claim R300m from former Seardel directors over suspect property transactions.
The developments seem to confirm that HCI - which pumped R250m of rescue capital into Seardel last year - has uncovered corporate excesses that may well have played a major part in putting the company into a dangerous debt mire in financial 2008.
Before HCI took over management control, Seardel was headed by founder and major shareholder, Aaron Searll. During Searll's long tenure Seardel was known for its corporate excesses - including (until the mid-1990s) a plush head office in Bishops Court and a sprawling beach house in Plettenberg Bay. This was later sold to Searll, after the fact was uncovered by Finweek.
Seardel, which recently was forced to shut down a huge chunk of its textile capacity, is battling for survival in industries where trading margins are threadbare thanks mainly to a continued flow of cheaper imported products.
Responding to questions around the litigation, Seardel chairperson Johnny Copelyn (who is also the CEO of HCI) said one area of the litigation focused on former directors'emoluments with a view to the purchasing of cars. "These cars had nothing to do with the business, and there can be no reason why company money was spent on these vehicles."
Because these matters are sub judice, Copelyn indicated there was not too much detail that could be provided at this point.
But he said the main portion of the litigation revolved around certain directors buying company-owned properties, as well as directors purchasing properties that should have been bought by Seardel.
"We feel the former directors ought not have done these deals."
Property a key issue
Copelyn said in some instances the properties had already been sold, but Seardel would look to be refunded for any loss of profit suffered by the company.
The litigation aims at claiming relief of about R300m ? which is almost equal to Seardel's current market capitalisation of about R320m.
Copelyn confirmed that one of the properties involved in the litigation was a Searll-owned property that was still being rented by Seardel.
Seardel's annual report still shows a related party transaction involving property leases entered into with entities controlled by Searll, or in which Searll has part ownership. By Fin24.com's calculations, these entities earned about R25m from the property leases over the last three years.
Property is a central value issue at Seardel - and a key consideration for controlling shareholder HCI, which went out on a limb to provide much-needed new capital the struggling company.
Seardel's array of industrial properties underpins a tangible net asset value of nearly 200 cents per share - a value that is far in excess of the company's share price on the JSE.
- Fin24.com
