- February 23, 2012
- Posted by: admin
- Category: Clothing and Textiles
The value of the Southern African Clothing and Textile Workers Union’s (Sactwu’s) indirect stake in Seardel appreciated by R41 million on Monday as speculation pushed the share to a high of 99c.
The news does not appear to have caused much excitement at Sactwu’s head office, where the leaders are in the midst of tough negotiations with Seardel management about the proposal to retrench 1 500 employees.
The appreciation in the share price is not thought to have had anything to do with the proposed retrenchments. It was attributed to speculation about the outcome of a drawn out legal battle between the current management of Seardel and some former directors, chief of which is Aaron Searll, the founder and long-serving chief executive of the group, who died in 2010.
But the coincidence of the share price appreciation and the proposed retrenchments does highlight the difficulty that Sactwu faces as a representative of the supplier of labour and of capital to the company.
One minority shareholder put the situation in particularly stark terms: “The sad reality for Sactwu is that the value of the company appreciates every time there is a retrenchment exercise because it frees up land that has been used for manufacturing and makes it available for development, which is far more profitable.”
Cape Town 091002 Southern Africa Clothing and Textile Worker’s Union (SACTWU) secretary general for the Western Cape Andre Kriel speaks at a press conference in Salt River today about the wage settlement after a two week strike by clothing and textile workers. The strike has been suspened until all regions’ demands are met.Picture:Ayanda Ndamane Zara
He referred to the 2009 closure of the Frame plant outside Durban. “The plant was sold and shipped out of the country and the property was developed and is being rented out.”
Sactwu itself has no doubt about where its primary responsibility lies – it rests firmly with the workers.
Andre Kriel, Sactwu’s general secretary, told Business Report that the union invested in Seardel with the sole objective of saving 15 000 jobs, which were at risk when the company was facing liquidation back in 2008. “Under the circumstances that prevailed at the time, no investor was prepared to take the necessary risk to save the company. If we hadn’t acted Seardel would have crashed.”
A massive rights issue pitched at 50c a share and underwritten by Hosken Consolidated Investments (HCI) saved Seardel from almost certain liquidation following a R312 million loss in financial 2008. About R200m of the R300m used to acquire the 70 percent stake in Seardel came from Sactwu, which was intent on saving the jobs of 15 000 workers. Sactwu is the largest shareholder in HCI with a 38 percent stake. To date, some 5 000 jobs have been lost and a further 1 500 cuts are on the cards.
Kriel said that while he was aware of the value in Seardel’s property portfolio, Sactwu’s interest was, and remained, in securing the clothing and textile operations. Kriel said the textile operations had “stabilised” but the clothing business was still under stress. He indicated that it was not Sactwu’s intention, as a major shareholder, that Seardel be managed merely to derive value from its properties.
With regard to the 1 500 retrenchments announced on January 26, Kriel said that Sactwu was in negotiations to resolve the situation.
“The union’s objective is to stop it (the retrenchment) and we have commenced negotiations with management to that end. The union does not accept these job losses.”
Kriel said each of the 1 500 workers supported five people, which means the livelihoods of 9 000 people are at stake.
At the time that the retrenchments were announced, management said this was necessary to shore up the losses in the group’s clothing division. Although the group overall returned to profit in 2011, helped by a R77.9m government grant and a R12.2m export incentive, this was despite a loss at the clothing division.
The 2011 annual report does not appear to give any details of conditions that may or may not attach to the government grant, nor does it indicate whether it is an ongoing payment from government.
For the union, the disappointing news is that the results for the six months to the end of September 2011 show that losses at the clothing division increased significantly. This would support management’s calls for retrenchments.
Meanwhile, the legal battle that was set in motion three years ago, shortly after HCI had secured control of Seardel, looks set to bring some cheer to shareholders.
In his first report as Seardel chairman in 2009, the no-nonsense Johnny Copelyn, himself a former Sactwu official, referred to a claim of R300m against former directors, “primarily related to personal property transactions, the opportunity for which the company believes ought to have been passed to the Seardel group”.
The details of the claim have remained clouded in secrecy because the parties chose to avoid court and attempt settlement through arbitration.
In an interesting aside, it appears that the arbitration process has seen the Johannesburg office of law firm ENS, which is acting for HCI, do battle against its Cape Town office, which was formerly Sonnenbergs, the law firm that previously acted for Seardel.
Last Friday Seardel issued a cautionary statement notifying shareholders that it was involved in negotiations, which if successfully concluded, could impact the share price. This coincided with market reports that the company was close to finalising the arbitration proceedings and that the outcome was favourable to Seardel.
Stuart Queen, Seardel’s chief executive, would not provide any further details. When contacted he merely stated: “If and when we have any further announcements to make we will make them through the Stock Exchange News Service as is required.”
Seardel’s shares were untraded at 99c yesterday.
Source: Business Report – Ann Crotty