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Johannesburg - Empowerment group Hosken Consolidated Investments (HCI) has disclosed that its struggling clothing and textile subsidiary Seardel will claim R300m from former directors.
The matter was highlighted on Monday during the HCI annual general meeting (AGM). Last year HCI took control of Seardel after underwriting a R300m rights issue to recapitalise the debt-laden company.
HCI CEO Johnny Copelyn told shareholders the claims revolved mainly around property transactions Seardel entered into with former Seardel executives.
Fin24.com understands one of the former executives is Seardel founder and former CEO Aaron Searll, who remains a significant shareholder in the company.
Copelyn explained Seardel had entered arrangements - some dating back 40 years - to rent certain properties from the former executives. He believed these properties should have rightfully been acquired by Seardel, or at least offered to the firm.
The matter appears to be significant for HCI's hopes of making a return on its sizeable investment in the struggling Seardel. Copelyn indicated that successful litigation could "double the company's market capitalisation".
'Ghastly results'
No other details were provided at the AGM, but Seardel's latest annual report said the claims stemmed from an extensive forensic audit.
The annual report referred to seeking R300m from various substantial claims against former directors of Seardel - "primarily related to personal property transactions, the opportunity for which the company believes ought to have been passed to the Seardel Group".
The annual report reckoned the action was being defended and was likely to continue for some time.
In a review of Seardel's business to date, Copelyn said results - including the discontinued Frame operations - would be ghastly.
But he reckoned continuing operations would reach break-even between October 2009 and the end of March 2010.
Copelyn reiterated Seardel was a valuable business, pointing out the company had a strong asset base in the form of its various property holdings.
On Monday, Seardel advised that its losses for the six months to end-September would come in between 30 cents and 32 cents per share.
- Fin24.com