Christopher Adams

Christopher Adams is the Markets and Banking reporter for the New Zealand Herald

Mainfreight sues for $18m after shock client loss

Company chasing damages after claims impending loss of client not disclosed in acquisition.

Analysts hailed the Wim Bosman acquisition as a good move for Mainfreight. Photo / Sarah Ivey
Analysts hailed the Wim Bosman acquisition as a good move for Mainfreight. Photo / Sarah Ivey

Kiwi logistics operator Mainfreight is seeking millions of euros in damages from the former owners of the Wim Bosman Group, the European transport firm it bought in 2011, over allegations the company failed to disclose the impending loss of a major customer in the lead-up to the acquisition.

The company bought the Netherlands-based firm - which was one of the largest privately owned freight businesses in Europe, with operations across the continent including in France, Romania, Poland and Russia - for €110 million ($NZ186 million).

The court action and surprise customer loss, which has not been disclosed to the stock exchange, is revealed in Ready Fire Aim, a soon-to-be-released book on the history of Mainfreight by Keith Davies.

It says that before the acquisition Mainfreight was fully aware that three of Wim Bosman's biggest customers - Samsung, Sara Lee and European toy and games giant Ravensburger - were due to stop using the firm and the loss of those clients was factored into the sale price.

But Mainfreight claims it was not informed by Wim Bosman that it was also going to lose Giant, the world's biggest bicycle maker.

According to the book, the company did not find out about the loss of the Giant account, which resulted in "empty warehouses", until the acquisition was completed on April 1, 2011.

The Business Herald was unable to contact Mainfreight managing director Don Braid, who was in Europe yesterday.

But in Ready Fire Aim he is quoted as saying: "Giant leaving hurt. Had we known they were going we would have negotiated a far cheaper price ... Wim Bosman knew Giant was going and should have told us. Frankly it leaves a sour taste."

The company has begun legal proceedings in the Netherlands and is seeking €11 million ($18 million) in damages from the former owners, Dutch businessman Wim Bosman, who was 69 at the time of the acquisition, and his wife.

Craigs Investment Partners head of private wealth research Mark Lister said the fact the company had launched legal action suggested Mainfreight thought it had conducted proper due diligence before going ahead with the purchase.

At the time of the acquisition analysts hailed the transaction as a good move for Mainfreight, despite the economic hardship facing economies across Europe.

It has taken longer than expected to bed down the business, however, and tough European trading conditions wiped out the company's earnings growth in its last full-year result.

Total group earnings fell 0.5 per cent to $137.5 million in the year to March 2013, while sales rose about 4 per cent to $1.88 billion.

Mainfreight shares, which closed at $10.62 last night, have shed almost 13 per cent since hitting an all-time high of $12.19 in February.

Ready Fire Aim will be available in bookstores from August 16.

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n4 at 30 Jul 2014 15:46:29 Processing Time: 1257ms