Takeover on the cards - Article, page-6

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Woes continuing for SurfStitch but takeover could be on the cards


Jacinda Tutty, The Courier-Mail
September 29, 2016 9:14pm


THE soap opera drama continues for SurfStitch as a legal rival snaps up more shares in the company, fuelling speculation the online surfwear retailer is in play for a takeover.
Crown Financial, the company linked to Three Crowns Media group which is locking horns with SurfStitch in court, increased its shareholding to 10.41 per cent from 9.33 per cent on Wednesday, making it the largest shareholder in the company.
It follows two other surprise buy ups by Crown earlier this month. Baillieu Holst analyst Mathan Somasundaram said all signs pointed to an imminent takeover.
“It’s an attractive takeover bid for someone who wants to come in and chop it up, strip out the retail business from the media assets and run it tough until margins improve and growth comes back,” Mr Somasundaram said.
“The share price is telling us it has plateaued around 20¢.
“And if you were going to do a takeover you’d need the backing of a few big players who would need to buy up decent holdings.
“It’s really a matter of time.”
Crown’s latest move follows the sudden resignation of chief financial officer and company secretary Karen Birner this week. It was the latest blow for SurfStitch’s management team following the departure of two CEO’s, chief operating officer Mark Storey and company chairman Howard McDonald in the past nine months.
The company’s share price has been shredded following the management shake up and three profit downgrades in a matter of months, stripping more than $500 million of shareholder value from the group. It culminated in a bottom line loss of about $155 million last financial year, a far cry from former CEO Justin Cameron’s dream to turn the Gold Coast-based surfwear retailer into the “Netflix and the Amazon” of the extreme sports market.
SurfStitch shares, which were issued at $1 in December 2014, closed half a cent lower at 18.5¢ on Thursday.
Mr Somasundaram said with a “continuous break down on the management side” and no plans to change the company structure, SurfStitch’s value was in someone breaking up the business.
CEO Mike Sonand has previously offered a scathing assessment of the group’s past acquisitions plan, which ignored the traditional retail business in pursuit of creating a media platform that would convert traffic into sales.
He has earmarked plans to return the business to profit by 2018 by slashing costs, overhauling its stock and boosting margins with a private label range. The group also outlined plans to sell off Surf Hardware International.