Surve draws the ire of LeisureNet boss

Published Jun 24, 2003


Cape Town - Had a deal with Capvest to acquire control of LeisureNet in 2000 gone ahead, the company would not have gone into liquidation, Peter Gardener, former joint chief executive, told a commission of inquiry yesterday.

Gardener was giving evidence into the reasons for the company's collapse in October 2000.

In his overview of the LeisureNet business, Gardener singled out Iqbal Surve, the chief executive of Sekunjalo Investments, as a major obstacle. Sekunjalo was the largest shareholder of LeisureNet with 18 percent.

Gardener said Surve had taken board discussions outside the company and had suspected him and Rod Mitchell, Gardener's joint chief executive, of colluding with Capvest to "crash" the company.

Peter Flack, a turnaround specialist who was brought in as acting chief executive in August 2000, was also not spared criticism.

Gardener said he and Mitchell were placed under quarantine by Flack and his team, who "moved in literally like a bull in a china shop". He and Mitchell were removed from the negotiating team with Capvest, and Flack and his team had taken over negotiations "about which they knew nothing".

That was a fatal mistake, Gardener said.

LeisureNet experienced robust growth in 2000 and he and Mitchell believed they had the backing of Capvest to take Healthland International, the offshore subsidiary, through a listing on the London Stock Exchange.

Capvest did not back them and that was one of the reasons for the collapse of LeisureNet, Gardener said.

Early in December 1999, Fitness Holdings Worldwide had approached LeisureNet. It wanted to do a deal whereby the two companies would amalgamate. Fitness Holdings would control businesses in the US and the Far East, and Healthland would control those in Europe and Australia.

At the time, LeisureNet's share price was hovering between R2.30 and R2.50, and Gardener and Mitchell sent a round robin resolution to the board, asking for authority to conduct a due diligence.

They met Surve in February 2000 to get his views.

During that time, Gardener said, there were enormous trades in LeisureNet shares, which made him and Mitchell nervous. Acting on advice, they issued a cautionary notice.

Both Surve and Maxim Krok, a director, declined to support the resolution. As a result, Gardener said, the big opportunity with Fitness Holdings was lost.

Had it gone ahead, he said, LeisureNet would not have been placed in liquidation.

The inquiry continues today.

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