Commercial insurance article archive
Which way now for Erinaceous?
Troubled property services consolidator Erinaceous Group may find it has found a saviour after the hedge fund Fursa approached Keith Hamill to take the reins and try and turn the company's fortunes around.
Hamill, the current chairman of Travelodge and the former finance director of WH Smith, will face a daunting task to put the firm back on track after it was revealed that it was in danger of breaching its banking covenants two weeks ago.
The company's auditors, Deloitte & Touche, indicated it believed there was “a material uncertainty which may cast significant doubt on the group's ability to continue as a going concern", suggesting that the Erinaceous' time was coming to an end.
But Fursa tripled its stake in the firm last week to reach 18 per cent and is rumoured to be lining up a bid to oust the company's management - bringing in Hamill as a replacement.
However, other vultures are also circling the crippled firm, with the Sunday Telegraph claiming that Tchenguiz's Consensus Business Group is pondering a bid.
An unnamed source close to Tchenguiz told the newspaper: "With the right people in place at Erinaceous, there is potential, but it is a tricky situation. A lot of the divisions have been allowed to drift."
This was the result of a monumental fall in the value of Erinaceous' holdings by 85 per cent over the year – leading to a market value of just £60 million, down from a price tag of £350 million at the start of 2007.
Allegations of overvaluing properties by an offshoot of the firm, Dunlop Haywards, have been the subject of a long-running investigation by the Serious Fraud Office, which has added to the problems at the firm.
However, the greatest damage done to the company, in the eyes of its investors and the wider sector, was in the breaking of its banking covenant.
"Erinaceous expanded too far and too fast," one source close to the company told the Telegraph at the end of last month.
"They bought some of the best companies in the sector and then let them drift. The idea was good but it just doesn't seem to have worked."
Erinaceous had entered the property services market claiming it intended to create a 'one-stop shop' for the industry and made at least four acquisitions of other firms with prices ranging from £7 million to £50 million.
Current chairman of the company, Nigel Turnbull, admitted that the firm had faced a tough start to the year in the company results last month.
"The first six months of 2007 has been a period where the integration of the two acquisitions in March 2007 and prior years together with divisional management changes has had a detrimental effect on the results of the trading division," he said.
However, continued failures and an inability to retain the skilled staff it acquired through its acquisitions have seemingly made Erinaceous an obvious target to be picked apart by other firms.
It remains to be seen whether a bid from either Fursa or Tchenguiz will be successful, and even then if the company will remain together or broken up into its constituent parts – a reminder that the grandest ideas can cause the biggest embarrassment.
12 Oct 2007