Lowe’s tells court of Woolworths’ game plan to exit Masters

US group Lowe’s has told a court that Woolworths cooked up a “straw man” plan B to get out of its Masters venture.

Woolworths cooked up a “straw man” plan B as part of a strategy to get out of its disastrous Masters hardware joint venture with US group Lowe’s, a court has been told.

The “Plan B straw man” was part of Woolworths’ “game plan” to announce the end of Masters before Woolworths revealed its earnings on August 24, lawyers for Lowe’s claim in ­documents filed with the Federal Court.

Lowe’s claims Woolworths’ primary plan was to use KordaMentha partner Mark Korda to deliver a message that directors of Masters vehicle Hydrox Holdings risked jail in Australia if the company traded while insolvent.

The filings also reveal that investment bank Citi’s fee for advising Woolworths on the deal depended in part on how fast it got the ailing supermarket group out of the Masters debacle.

Lowe’s has asked the court to wind up Hydrox Holdings, claiming it has been oppressed by Woolworths, which owns two-thirds of the company. Woolworths denies the claim and says Lowe’s is attempting to avoid a binding private arbitration by going to court.

Lowe’s has laid out its version of events covering a torrid series of board meetings in a statement of facts and an affidavit sworn by vice-president Robert “Trey” O’Neale III, filed with the court.

Mr Korda’s alleged role was to help Woolworths push for the sale of Hydrox’s assets by telling Lowe’s nominees on the board the company would become insolvent if the deal did not go ahead and explain that “Australia has one of the toughest trading whilst insolvent laws in the world. In summary, if directors are found guilty of trading while insolvent it is a criminal offence and they could go to jail.”

If the Lowe’s nominees did not approve the deal, Woolworths ­allegedly had a back-up plan to terminate the joint venture agreement and go ahead anyway.

Citi’s head of investment banking, Aiden Allen, described the “Plan B straw man” in an August 17 email sent to Mr Korda and Woolworths’ representative on the Hydrox board, Richard Dammery. In the email, Mr Allen proposed first trying to resolve the Masters impasse with Lowe’s — but if that failed, to “terminate the JVA (joint venture agreement) and vote in favour of the HTH (Home Timber & Hardware) sale and inventory agreements and reserve rights to sign agreements”.

Matters came to a head at a board meeting that started at 6.30am on August 24, or 4.30pm US time, called because Lowe’s representatives felt they had not had enough time to consider more than 1000 pages of documents before a meeting the previous day.

Mr O’Neale told the court that rather than Woolworths’ sale ­process, “there is another option, which is voluntary administration”.

At about 8.10am the meeting was adjourned. Mr Dammery sent in his resignation as a director and Woolworths terminated the joint venture. Woolworths has yet to respond to Lowe’s allegations.