Two directors of Midlands fasteners business Widney escaped being ousted last week. In a turbulent turn of events the main shareholder out for their blood became embroiled in troubles of its own.
SEP, a major shareholder in Widney, was expected last week to win an extraordinary general meeting vote to turf out the company’s directors. The meeting was called by the then SEP chief executive Paul Formby, who was angry at the apparent failure of Widney directors to sell off underperforming businesses and return some capital to shareholders.
Formby got the management team to agree to the disposals in January 1998, but a year later there had been no apparent progress. The EGM was to have spelt the end for Widney chairman David Cassidy and managing director Paul Lines.
But they are still in place. Just hours before the meeting was to take place at the London offices of its auditor, Grant Thornton, SEP’s shares were suspended following the discovery of alleged serious accounting irregularities. Formby resigned immediately. He was uncontactable late last week at his Guernsey home.
SEP’s problems stem from the discovery of errors at its computing subsidiary, Quintech, last November. Intra-group trading meant the whole business had been affected. An insider last week described the situation at SEP as `a mess’, adding: `There are forensic accountants crawling all over the group.’
The EGM went ahead, but proxy votes meant Formby’s motions were defeated, despite a majority vote in favour of them by shareholders present at the meeting.
The publicity accorded the spat between SEP and Widney has had one potentially favourable consequence. An as-yet unidentified third party approached Widney last year with a view to taking it over. Talks with this would-be buyer continue.
Any deal will still leave shareholders nursing a loss. Widney’s shares are worth a fraction of their 165p high in 1995. Stuck below 50p for most of last year, they are now worth just 36.5p. There is little joy for SEP shareholders either. The group is resigned to a lengthy investigation into how Quintech’s problems could have affected the entire group so badly.