Industry news

A tale of three companies

“Brimstone has understood for a long time that the company (Canterbury) has been battling with cash flow problems, but because we believed in the Canterbury brand, we were prepared to support them,” says HoM CEO Iqbal Khan.

“But when suspicions and allegations of financial and criminal irregularities surfaced, we backed away. Brimstone is built on good corporate governance principles and the moment evidence of suspected foul play surfaced, we walked away. We have now requested a full forensic investigation.”

All three the companies brought into Brimstone by Linder will be investigated and according to Khan the investigation will cover the past five years — which will include the period prior to Brimstone’s shareholding and ownership.

Brimstone’s fully owned subsidiary HoM bought a 51% stake in the Fifth Element Group, founded and owned by Dave Linder, in November 2005. The company then had an annual turnover of R100-m and manufactured for large retail groups like Woolworths. According to Khan, under HoM Fifth Element’s annual turnover grew to R200-300-m, before dropping to about R150-m last year.

HoM also bought 51% of O’Neill South Africa and the licensing rights to its brands O’Neill, RipTear and Barbie from Linder. When the O’Neill contract came up for renewal at the end of last year, O’Neill International chose to sign an exclusive long-term licensing and distribution agreement with Durban-based Pure Sport Apparel, with Dale Bamford as MD and surfer Paul Canning as marketing manager.

According to Khan, HoM was happy to relinquish the contract as O’Neill, with an annual turnover of R20-30-m, was not profitable for them.

In March 2007 HoM and Fifth Element Marketing also became the owners of Canterbury International SA, the local distributor and licensee of the international company, headed by Paul Zacks after a local buyout in the beginning of 2004. At that stage Canterbury had a relatively small local profile, which changed dramatically after they signed a sponsorship contract reportedly worth R140-m for five years with SA Rugby to supply the Springbok jersey, as well as licensed supporters’ apparel. This agreement expires at the end of this year.

After initial trading difficulties, for example when all the replica shirts had to be recalled when the official Springbok rugby sponsor was changed from Castle to Sasol soon after their first shirts were sold into retail, the Canterbury company began growing in SA at a reported rate of 300% per year. Cash flow problems, however, prompted the owners to sell to HoM and Fifth Element in 2007.

The exceptional demand for Springbok supporters’ wear when the SA team won the 2007 IRB World Cup and the subsequent goodwill towards the Springbok brand, helped grow annual turnover to R150-180-m. Worldwide, the Springbok shirt became a valued item.

A few months after Canterbury became part of HoM, Zacks allegedly had a disagreement with Linder over corporate governance, and he was suspended. He was subsequently appointed general manager of Global Brands SA, the international brand management, retail and licensing company, who is also FIFA’s licensing partner.

After Zacks’ departure, Linder took over the day-to-day running of Canterbury, but appointed Robert Chapman, who had worked in the sporting goods industry as a sports brand distributor until 2001, as general manager in January 2008. Chapman died of a bullet wound in September last year.

In July 2008 HoM bought Linder’s 49% shareholding in the three companies to become 100% owner. Iqbal Khan, HoM CEO, took charge of the day-to-day running of these companies. As part of the agreement, Linder continued to manufacture a certain line for Woolworths through a separate company.

When approached, Linder and Zacks declined to comment for publication.