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UNDOING THE KNOW

Seardel – resolution on the horizon

Arbitration of a R300m legal claim by clothing and textile conglomerate Seardel against former directors, including the late Aaron Searll, founder and former CEO, could be wrapped up early next year.

Arbitration of a R300m legal claim by clothing and textile conglomerate Seardel against former directors, including the late Aaron Searll, founder and former CEO, could be wrapped up early next year.

Seardel chairman Johnny Copelyn told shareholders at the company AGM last week that the arbitration was awaiting judgment on a legal point .

This concerns whether the former directors are being sued in the wrong name. The argument is about whether banks (which had outstanding loans to the company) rather than Seardel should be bringing legal action against former directors.

Copelyn said the resolution would determine whether the arbitration proceeded or was dismissed. If the latter, Seardel would rely on court proceedings to secure the R300m claim.

He said returning to court would mean a “different route to the same merits”, but indicated the case could take two to three years to conclude.

“Our expectations are still buoyant, and we hope to have the arbitration finalised in the first quarter of next year.”

The legal claim against former Seardel directors — mainly the Searll estate — first came to light in late 2009, not long after Hosken Consolidated Investments emerged as the controlling shareholder after a R300m rescue rights issue.

The quantum of the legal claim, which has not been detailed publicly but purportedly relates mainly to disputed property transactions, represents around half the company’s current market capitalisation.

The legal claims apparently centre on personal property transactions undertaken by Searll, the benefits of which Seardel believes should have been passed through to the company.

Market talk suggests Seardel would settle for the return of the properties in question at no cost , the return of the Searll family shareholding in Seardel and the writing off of a loan from the Searll family (through Grawood Investments).

Though the Searll family shareholding in Seardel was diluted in the 2009 rights issue, the family still has an interest in the company via a R100m loan. The Searll loan is unsecured. Secured loans from Standard Bank and Investec Bank appear to have been paid off, while the secured loan from the State Bank of India has been reduced. The Searll/Grawood loan has not been paid down for the past three years.

Source: Financial Mail – Marc Hassenfuss