Dispute jeopardises merger
A FALLOUT between FoneWorx and William and Issie Kirsh — representing one of its major shareholders — has put the planned merger with Value+ Nettwork on the line.
A FALLOUT between AltX-listed telecommunications company FoneWorx and William and Issie Kirsh — representing one of its major shareholders — has put the planned merger between the company and the Kirsh family’s majority-owned Value+ Nettwork on the line.
FoneWorx, which caters for technology platforms for companies to run short message services, signed an agreement to merge with Value+, which was expected to result in the formation of a R478m entity. The Kirsh family holds about 33% of FoneWorx, acquired in July last year, as well as a 75% shareholding in Value+ Nettwork.
Yesterday, interactions between the companies took a turn for the worse when the board of directors at FoneWorx declared a dispute. They blamed the Kirsh family’s “hostile, inappropriate and mischievous attempt to discredit a well-managed company” in order to control FoneWorx and its cash reserves.
The public fallout follows the Kirsh family’s vote of no confidence over the “lack of corporate governance and strategy” of the two nonexecutive directors of FoneWorx.
The Kirsh family said it requested that the board call an extraordinary general meeting of shareholders to remove and replace the two nonexecutive members, while retaining the executive directors to implement the merger.
In a terse statement released on Sunday, William Kirsh — the former CEO of unlisted media group Primedia — cited the failure by the board to disclose to shareholders the future direction of Foneworx’s fax-2- e-mail licence, which accounts for about 61% of the firm’s total sales and 70% of gross profits.
“We previously raised this issue in writing and in the form of meetings and it was completely rebuffed by the CEO,” he said.
FoneWorx CEO Mark Smith, however, said concerns over the company’s corporate governance were never raised, either verbally or in writing. “They did a comprehensive due diligence and never raised anything negative with the board.”
Regarding the call for an extraordinary general meeting, Mr Smith said management was in discussions with professional advisers and would always follow the appropriate and compliant route.
The dispute with the Kirsh family comes after FoneWorx was apprised of revised financial information — after the signing of the sale agreement — relating to a subsidiary of Value+ that is in a developmental phase, Opengate.
According to Mr Smith, the board raised concerns about the entity’s capitalisation policy. He said that Opengate’s capitalisation policy was not in line with International Financial Reporting Standards.
Mr Kirsh said the Foneworx board had failed to publish the extraordinary general meeting notice on the Stock Exchange News Service, and it was irresponsibly using Open-gate to deflect all the corporate governance issues that were raised.
“The Foneworx board fails to admit that there were no warranties on profits, or capital requirements given on both sides, and that any claim that there was a purported change in the numbers is furthermore without commercial merit.”