Watson firm sued over Bendon deal

By PAUL PANCKHURST

Eric Watson's Cullen Investments was accused in the High Court at Auckland yesterday of cynically reneging on obligations to a one-time partner in takeover plans for lingerie maker Bendon.

The accuser was economist and former Commerce Commission member Josephine Grierson and her company, Jowada Holdings. Jowada is seeking summary judgment for $886,727 plus GST, interest and costs.

The court case is not novel for Watson, an entrepreneur in exile and one of New Zealand's wealthiest businessmen.

Last month, the High Court ruled he unfairly cut businessman Greg Lancaster out of a deal to buy Pacific Retail Group.That decision is being appealed.

The latest case involves another would-be takeover partner who ended up out of the action. It also involves Pacific Retail Group.

Last year, Jowada hatched plans with Watson's company Cullen for a takeover of Bendon.

However, a different company in the Watson empire, PRG, completed the $59 million takeover of Bendon in March - and Jowada was not part of the deal.

Jowada argues an agreement last year between Cullen and Jowada said Cullen would pay a fee to Jowada if the latter was not offered the option of taking part in a takeover of Bendon.

Jowada's lawyer, Paul Dale, of Grove Darlow, told the court that PRG's takeover triggered the requirement for a payment - calculated on the basis of 1.5 per cent of $59 million.

The case for Cullen will be put on Tuesday, by lawyer Adam Ross, of Chapman Tripp.

Jowada is not seeking a summary judgment against PRG, but that company is a party to the proceedings.

Dale told the court Jowada was incorporated with a play for Bendon in mind.

The company entered into what was effectively a joint-venture agreement with Cullen on March 29 last year to provide advisory and financial services to Cullen and to invest in the takeover of Bendon.

The agreement talked of "the parties' intention to work together as a team on the deal" and of the possibility of Jowada directors becoming Bendon directors.

Dale said it became a fee agreement only if Cullen made a takeover move without giving Jowada the chance to take part.

An affidavit from Grierson says she and Watson met in May last year, and he agreed to a takeover that would require $20 million in cash, with the balance coming from debt and surplus cash within Bendon.

Dale said the parties reaffirmed the idea of a $20 million equity play - with Jowada contributing $5 million - in December.

Dale said the case turned on four key documents.

The March 2001 agreement was one.

The next was a letter on January 11 this year - a Friday - from Cullen's Phil Newland to Jowada with details of a proposed takeover involving $60 million in equity.

Under this proposal, Jowada would contribute between 25 per cent and 40 per cent - or $15 million to $24 million - a much larger sum than previously discussed.

The letter said Jowanda needed to provide an unconditional commitment and proof of funds by the following Monday or Tuesday.

The letter said "funds would need to flow prior to the bid being declared unconditional".

Dale said the time frame was so short - especially since it was the holiday season - and the terms so different from those previously discussed that it was not a genuine offer.

It could be seen as a cynical attempt by Cullen to avoid paying the fee.

The final key documents, he said, were Grierson's letters in response for Jowada on January 14 and then January 17 - expressing surprise and then complaining in detail.

Dale said affidavits filed in the case showed little conflict over the facts.

The key points of difference were in the gloss applied to them.

In terms of how the takeover was finally structured, Dale quoted a Herald report that said PRG's acquisition was financed by a $20 million rights issue, $21 million of borrowings and about $18 million of surplus cash held by Bendon.

Comments yesterday from Cullen's lawyer, Ross, flagged what he will argue: the type of takeover play discussed by Jowada and Cullen was no longer possible in January.

The case is being heard by Master John Faire.