Legal rival Crown Financial tstitches up retail stake of...

Legal rival Crown Financial tstitches up retail stake of SurfStitch

Jacinda Tutty, The Courier-Mail
September 12, 2016 9:13pm
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A COMPANY linked to a legal spat with SurfStitch has bought a substantial stake in the struggling surfwear retailer, increasing speculation a takeover could be imminent.
Crown Financial, the company linked to Three Crowns Media group which is locking horns with SurfStitch in court, made the surprise move, boosting its shareholding to nearly 10 per cent. Crown paid $2.7 million to take its shareholding to 8.25 per cent last Monday and bought another tranche of shares on Thursday, beefing up its voting power to 9.33 per cent.
Baillieu Holst analyst Mathan Somasundaram acknowledged the move was “weird” but said it could be a sign the surfwear company was a prime target for a takeover.
“It could be a case of keeping your friends close and your enemies closer,” Mr Somasundaram said.
“But it’s also come to a point where someone could come in and break up the model and get value out of it.
“It makes sense to make a move now, SurfStitch has had the life beaten out of it and most investors aren’t going to touch it.
“It needs a revamp so it makes sense to be taken out.”
Crown Financial’s play comes as major shareholders, including FIL Investments International, Ausbil Investment Management and Perpetual Limited, have sold off much of their stakes after the company’s share price was wiped out.
SurfStitch shares reached a high of $2.13 in November, only to hit rock bottom at 11¢ after its full-year result last month.
It closed at 18¢ yesterday.
Crown’s linked company Three Crowns Investments, which has a portfolio of magazines and websites, such as Surfing World, Coastalwatch and Mountainwatch, had entered into an agreement with SurfStitch to share content from SurfStitch’s subsidiary publishers, Magic Seaweed and Garage Entertainment, before the deal turned sour, resulting in legal action.
TCI is now trying to recoup $275,000 in fees related to the branding of an app, according to SurfStitch ’s financial report. But it is not the only court case distracting SurfStitch from its return to glory.
Although it was unclear if former chief executive Justin Cameron (pictured) was gathering troops to make his promised play for a buyback of the company he founded with surfing buddy Lex Pedersen, Mr Somasundaram said it was unlikely he would again take the reins.
“It does look like a classic candidate for private equity,” he said.
“But, whether they bring the former CEO back on is unlikely, the market is more likely to back someone from the outside with fresh eyes.”
SurfStitch declined to comment.