CNA in fight for its life
Rocked by boardroom battles, ailing chain on hunt for new funders
● Struggling stationery group CNA, which has been embroiled in a public battle with its former boss Benjamin Trisk over its future direction, confirmed this week it is in a fight for survival, saying it is negotiating with funders to help see the 125-year-old business through a trading environment ravaged by the pandemic.
A meeting on Friday that Trisk said was to “discuss a resolution removing me from the board of CNA operations” has been adjourned until Monday.
Asked this week whether the company could be saved, CNA operations director Rob Shortt said it “depended on getting some financing into the business. Failing that we are going to have to review everything.”
CFO Nazir Patel is “working very hard talking to possible people to come on board to bring in finance”, Shortt said, adding that “hopefully we will have an answer within two weeks”.
Shortt confirmed there had been a meeting scheduled with Trisk on Friday but said he could “not comment further”.
Asked for detail on the group’s cash-flow problems, Shortt said “it is too sensitive and I’m not able to answer it at this stage”.
Trisk said: “There is no question that CNA is trading in financially distressed and insolvent circumstances.”
The fight between Trisk and the rest of CNA’s management team erupted publicly about two weeks ago when Business Day reported that the management team was at loggerheads with Trisk after he approached business rescue practitioners without their consent.
With CNA management seemingly in disarray, about two weeks ago JSE-listed investment group Astoria sold its 70% interest to the rest of the management team, including Shortt, Patel and director of procurement Olinka Nell, for R1.2m, the same amount it paid for it.
Trisk, who holds the remaining 30% of CNA, said: “I and my legal team believe that the share purchase from Astoria is unlawful, and that has consequences for any funding lines that … Patel is currently negotiating.”
Shortt said: “As far as I am concerned, it [the deal with Astoria] was all above board.”
Astoria together with Trisk bought CNA from Edcon in February last year for effectively R1 and subsequently contributed further capital to pay for transaction costs.
This week Astoria director Jan van Niekerk said the company’s investment strategy is to “back good businesses with good management teams with good prospects” and that its “sense is that the CNA management team is not near coherent enough to justify additional financial backing”.
“I think CNA needs help and breathing space to get to that in the next nine to 12 months. I think the current management team need some funding to get there and we are aware they are raising funds from various parties. We decided to get out of the way,” said Van Niekerk.
There is a viable business case for CNA, he said, but not in the current format of 160 stores with “big outlets in malls in large cities. There is space for a stationery and book retailer in smaller areas and with smaller stores and a proper online presence, which needs to be built further by CNA. And also they need to be able to address the corporate and schools market, which CNA hasn’t recently done.”
Investment analyst Chris Gilmour said the problem with CNA is that it is “neither fish nor fowl. Nobody knows what CNA is. If you go back 50 years, the initial idea was good. This was stuff you bought on impulse. You would get newspapers, magazines and that’s when we still had high streets in South Africa. High streets don’t exist any more, they’ve been replaced by shopping malls.”
CNA expanded into malls and started “going very upmarket”, offering cellphones and laptops, but it couldn’t compete with the likes of Incredible Connection, he said. CNA also lost out because bigger brands, such as Pick n Pay, sold magazines and newspapers.
He said CNA has “been on life support for a very long time, the best part of 20 years”.
For CNA to survive it has to “find a new niche and it has to be much, much smaller”, Gilmour said.
Shortt, who would not disclose how much funding is required to keep CNA afloat, said it is no secret the group is in financial difficulty and confirmed it is behind on payments to landlords and suppliers.
But until recently, he said, the group had been “looking at a totally different world” as it hoped Trisk would bring in “funding” from outside parties to assist the business.
Shortt said that when news of the legal battle between Trisk and his former employer, Exclusive Books, became public six weeks ago, it cast a shadow over CNA.
Trisk left Exclusive Books in March 2018 after incurring unauthorised personal expenses, according to court documents.
He was subject to a disciplinary inquiry, but Exclusive Books reached a settlement agreement with him whereby he resigned and was paid R2.4m in addition to having his loan account for unauthorised expenditure written off. He lost a subsequent legal battle against Exclusive Books over its refusal to help him obtain tax clearance.
In a statement in April, Exclusive Books said in light of the “content” of the judgment, it had sought the advice of lawyers and was in the “process of considering whether it ought to now pursue a criminal complaint against Mr Trisk”. Shortt said the judgment against Trisk “painted him in a bad light”.
Trisk said: “The idea that hotly contested and settled allegations against me are problematic for funders is nonsensical. My experience is very different. My departure from Exclusive Books was governed by a settlement agreement that was proposed by the other party and was confidential. All the provisions of that agreement were signed.”
Shortt said that “unfortunately the shadow was just too long” and CNA started “getting feedback from our creditors and landlords asking what was going on and is Benjamin still working for you?”
Shortt said Trisk offered to resign as CEO at a meeting on April 19, and CNA told him it accepted his resignation from that date. Trisk is a still a board member.