Sactwu faces legal action as guarantor of a R65m deal
Union faces legal action as guarantor of a R65m deal in which Deneb sold textiles firm Winelands – but has yet to be paid the first instalment
Deneb Investments has called out former shareholder, the SA Clothing & Textile Workers’ Union (Sactwu), for a guarantee covering the recent sale of its Winelands Textiles subsidiary in Worcester.
The first tranche settlement for Winelands — due at the end of March — is still outstanding, and Deneb is now pursuing legal action against the buyer and the union for the full amount.
The situation could be slightly awkward. Sactwu is the majority shareholder (32.2%) of Deneb’s parent company Hosken Consolidated Investments (HCI), and was formerly a sizeable shareholder in Deneb (previously Seardel).
The relationship goes even deeper. Sactwu also acquired most of Deneb’s clothing manufacturing around six years ago when these loss-making entities were slated for closure.
Winelands — better known in the textile trade as Hextex — was sold to an empowerment entity, K2019630452, for R65m earlier this year.
The name linked to the empowerment entity is businesswoman Tina Eboka, a former Seardel nonexecutive director.
Deneb, which has a valuable industrial property portfolio, has been scaling back its loss-making and unviable operations.
Settlement of the Winelands disposal was guaranteed by Sactwu. In terms of the sale agreement, R25m was due to Deneb by the end of March. The balance was set for settlement in bi-monthly instalments that would start in July (with interest accruing at prime plus 1%).
In its results for the year ending March 31, Deneb notes that the purchaser is now in breach of the contract, having defaulted on the payment agreement. "Deneb has initiated legal action against the guarantor [Sactwu] of the purchase consideration of Winelands Textiles of R65m," the company says.
Sactwu’s stake in HCI is worth around R1bn, and the union collected gross dividends of around R77m in financial 2019.
Legal action taken to its logical conclusion might strain relations between Deneb, HCI and Sactwu. But hostilities, at this juncture, seem unlikely.
Deneb also says the value of the underlying security held is "significantly more" than the outstanding proceeds. This precludes Deneb from making a provision for nonrecovery of the sale proceeds.
Deneb CEO Stuart Queen tells the FM the initial settlement amount remains outstanding, but he is confident the proceeds from the sale will be received shortly.
He says complications linked to the Covid-19 outbreak could have disrupted settlement schedules.