The impending break-up of the company formerly known as Quindell was a factor in the timing of Slater & Gordon’s (S&G) decision to start legal proceedings over alleged fraudulent misrepresentation in the deal to buy Quindell’s professional services division, the firm has said.
Watchstone Group – the renamed Quindell – revealed yesterday that S&G had put it on notice of the action, which the law firm confirmed overnight in a statement to the Australian Stock Exchange.
“The claim is based upon serious allegations against Watchstone and its then senior management, including fraud, concerning the purchase by S&G of Watchstone’s professional services division in 2015,” it said.
“The filing and timing of the claim also take into account the recent market announcements by Watchstone that, in the face of the claim, it intends to divest itself of its remaining assets.
“The value of that claim exceeds the net assets of Watchstone and the monies currently held in escrow by several hundred million pounds.”
Watchstone’s current market capitalisation is £65m. Over the past year, it has disposed of or closed four “loss-making, cash-consumptive businesses”.
Issuing its annual results last month, chief executive Indro Mukerjee said: “I believe that we will best serve our shareholders by realising the value of our operating businesses (through sale, merger/demerger or IPO) at the optimal time; by managing legacy matters in the most efficient manner; and then to return the maximum cash to shareholders at the earliest opportunity subject always to the need to ensure the interests of creditors are adequately safeguarded (including in respect of any contingent liabilities).
“As such, I have recommended, and the board has agreed, a plan of action which will result in completing the phase I started back in September 2015 and which will move Watchstone into its next phase by the end of 2017.
“Any businesses held beyond 2017 will be cash generative and will not need constant operational management by Watchstone, as has been the case so far.
“This will mean that any retained businesses will have their own complete management teams, clear business plans with milestones as well as systems and controls which will allow Watchstone to manage them as a shareholder rather than as an operator. This will enable a smaller board/central team to divest of such companies more easily and quickly when the time is right.”