The sorry saga at car servicing chain Midas has taken another twist.
Almost six months after the company collapsed into administration, investment firm Lazard Carnegie Wylie has proposed a $1.65 million deal to rescue the chain.
Lazard Carnegie Wylie was one of the company’s big investors, having pumped $10 million into the business since they bought a stake in March 2008. That the firm was prepared to stump up more money to keep the company going is hardly surprising – a simple wind-up of the chain would have meant that $10 million was gone.
Besides, Midas is actually showing signs of becoming a stable and profitable business. Since the administrators chopped 55 staff and 16 unprofitable outlets, the business appears to have been trading pretty well.
Of course, there is one group of big losers in this deal – the unsecured creditors, who are owed a total of $7.56 million, but are likely to get a maximum of $327,000 – a return of just 4c in the dollar.
It’s a shocking result, but the unsecured creditors don’t appear to have much of a choice but to accept the Lazard deal – there just isn’t another party willing to pay up and buy the business.
These unsecured creditors and other Midas critics are still entitled to ask one big question: where did the company go so wrong?
Did the company simply grow too fast? Did it hang onto unprofitable outlets for too long in the hope they could be turned around? Did the company gamble too heavily on its move into the area of LPG conversions when petrol prices were high, only for fuel costs to fall again?
One clear problem was the fractious relationship between the company’s franchisees and its former chief executive and major shareholder, Philip Bonney.
In the last few years, several franchisees and former franchisees have made allegations of unconscionable and misleading and deceptive conduct against Bonney, although he always denied the allegations and ACCC investigations did not result in any action against him.
One condition of Lazard’s deal is the removal of the Bonney as a director of Midas and the administrators have now terminated his employment contract.
The Midas collapse and resurrection has been a costly and messy story. Midas’s remaining franchisees, investors and lenders will be hoping Lazard’s deal marks the start of the new chapter.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
