SurfStitch hits back at accusations from spurned suitor as ASIC enters fray

SurfStitch has hit back at accusations from spurned suitor Crown Financial and criticised the actions of the company.

SurfStitch chief executive Mike Sonand in his office in Sydney. (Adam Yip/The Australian)

The bitter feud between SurfStitch and suitor Crown Financial continues to escalate, with the former using an update to shareholders to criticise the actions of Crown Financial in its bid to secure control of the company.

It comes as corporate regulator ASIC is drawn into the stoush, although its interest appears to be in the separate legal battle over disputed licensing deals between the two companies rather than the takeover deliberations.

The embattled ASX-listed SurfStitch (SRF), an online surfwear retailer, rejected a $55 million offer made by Crown Financial subsidiary Coastalwatch earlier this month citing both the low valuation and the ongoing legal scrap between the two companies as key reasons for the rejection.

It then entered a trading halt on Tuesday this week as it digested the contents of a letter sent by Crown Financial that had also been gifted to The Courier Mail.

Contents of that letter reveal Crown Financial inquiring on the financial state of the company, questioning whether SurfStitch might be in a “perilous” position.

It also hit out at SurfStitch’s response to its takeover offer of 20 cents a share, indicating it had met resistance in its right to access the company’s register.

“Our formal requests for shareholder contact details so we can communicate with them directly have met nothing but running interference from the company and its lawyers,” Crown Financial managing director Joakim Sundell wrote.

“Section 173(3) of the Corporations Act is pretty plain when it says that SurfStitch ‘MUST’ give a copy of the register to us. It is concerning that the company has refused to meet its statutory obligations and instead set on a course to frustrate our request without, in our opinion, having a proper legal basis for doing so.”

In a response today, SurfStitch said it had now delivered the copy of the register as requested.

“Following general assurances by Crown Financial as to the purpose for which the register would be used, a copy of the register has been provided,” the company said.

“In accordance with the Corporations Act, the company’s register of members has been, and remains, available for inspection by shareholders and third parties.”

There has been no revised offer put forward by Crown Financial, with SurfStitch steadfast in its plan to reject it.

However, the push from the suitor for access to the register hints a hostile bid that goes direct to investors may be in the works.

Meanwhile, SurfStitch said that corporate watchdog ASIC is looking into the activities that resulted in the contested contracts at the heart of the legal dispute after the actions forced a writedown and heavy pressure on SurfStitch’s share price.

“The company notes that ASIC has commenced an investigation into the company’s disclosures in connection with the contested contracts,” SurfStitch said.

“The company is co-operating fully with ASIC’s inquiries.”

In response to the questions of its financial position the group said the queries put forward were “speculative”, noting an ongoing strategic review meant it was unable to fully respond to all the claims in the letter.

“A number of the questions posed in the Crown Financial Letter are speculative or would require the company to comment on ongoing and incomplete negotiations (which may or may not lead to a transaction) and matters to be considered in the course of the ongoing strategic review,” SurfStitch said.

The company said it would provide more details on current trading conditions at its AGM on November 16.

SurfStitch shares rose 2.9 per cent to 18c in early trade and was holding around 19c in the lead-up to the Crown Financial offer.