Golf & Co. (TASE:GOLF) and businessman Haim Sakal, the partners in Arcadia's brands operations in Israel, are having serious disagreements. Sources inform "Globes" that the reason for the tension is the fact that Golf has agreed with the global Arcadia company on the launching of a website for selling the popular Topshop brand in Israel. The brand was launched in early April on the Golf group's online commercial platform, created by Adika. Sakal learned about the deal only afterwards, and is considering filing a petition for an injunction.
In February 2015, Golf completed its acquisition of a 66.33% controlling interest in the activity of the global Arcadia's brands in Israel at a value of NIS 56 million. Golf conducted the deal through Kitan Textile Industries. Sakal's company, Sea and Shells, the original franchise holder, owned 32.67%. The parties founded the Topshop partnership for the business, which included the Topshop, Topman, Dorothy Perkins, and Miss Selfridge brands.
Under the purchase agreement between the parties, it was agreed that call and put options would be granted: Sakal was granted a call option to acquire one quarter of Golf's holding in the business at a NIS 56 million value, depending upon financial results, starting at the end of 2016. Kitan was granted a call option from the end of 2016, and Sakal was given a put option, in which Kitan would acquire Sakal's stake in the partnership and the business assets. It was also stipulated that under certain conditions, Sakal could demand the immediate sale of his shares before that time.
For Sakal, the fact that the sale of Topshop brands on the Internet will take place outside of his partnership in Topshop with Golf means not only damage to their joint business - because it is clear that Internet sales will come at least partially at the expense of sales of the brands in stores - but will also partly deprive him of his franchise for the brand. Under the plan with Golf, it will pay the partnership with Sakal only 355 of the profit on Internet sales. This means that Sakal will get only a third of the profit he should get from his share in the partnership. Sources close to the two companies said that the tension between the parties had reached a peak, and that Sakal was considering getting an injunction against Golf that would bar it from selling Topshop products on the Internet. It is believed that the dispute is likely to end in the exercise of Sakal's option to sell his entire stake in the joint business to Golf. If this happens, Sakal is expected to file a lawsuit against Golf for damages resulting from what he alleges are Golf's unilateral measures.
As of now, the Topshop brands are not profitable. The annual report by the Golf group shows that NIS 4.1 million was lost on this business in 2015. This loss caused the Kitan subsidiary a NIS 2.1 million loss for the year. Excluding its share of the Topshop partnership losses, Kitan made a NIS 617,000 profit. Kitan also reported that its sales totaled NIS 53.9 million in 2015, including its share in the Topshop sales.
Published by Globes [online], Israel business news - www.globes-online.com - on April 15, 2016
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