How Melbourne duo’s coathanger recycling business could stymie billionaire Ruffy Geminder’s plans

A billionaire’s $300m privatisation deal appears likely to be scuppered by a $30m legal dispute relating to coathangers and as little as $2.2m pre-tax earnings.

Raphael “Ruffy” Geminder is on the verge of failing to privatise his ASX-listed business, Pact Group, by his deadline of the end of next week and it’s all down to a little-known duo who Pact sued three years ago.

The move is coming back to haunt the billionaire chairman. For almost nine months, Melbourne men David Harris and Mark Gandur have held out on accepting the takeover offer by Geminder’s investment firm, Kin Group, to privatise the packaging and recycling business that was floated on the ASX in a blaze of publicity in late 2013 after raising $649m from investors, but which more recently has fallen on harder times.

In 2018 Pact, chaired by Geminder who’s a member of The List – Australia’s Richest 250, did a deal to buy Harris and Gandur’s plastic garment hanger and accessories re-use business.

What was once a promising business relationship has turned into an ongoing and increasingly bitter Supreme Court legal battle that started three years after that 2018 deal and is now overshadowing Geminder’s separate takeover attempt of Pact.

On the one hand Harris and Gandur are fighting Pact in court; on the other, as shareholders they are holding out on accepting Geminder’s takeover bid for the company.

Supreme Court documents outlining the legal battle, obtained for the first time by The Weekend Australian, reveal how Pact sued Harris and Gandur to block them claiming a $30m earn-out fee related to financial performance in the 2019 and 2020 financial years.

The earn-out was to be in addition to the $122m in cash and equity Pact initially shelled out to buy the duo’s TIC Retail Accessories business in 2018.


What followed are disputes about coathangers, Covid-19, business interruption insurance, document delays and deadline interpretations.

And in a case that looks like a billionaire scorned, that court battle has now also led to Geminder’s Kin Group looking increasingly unlikely to gain 90 per cent of Pact’s shareholding that would trigger a compulsory takeover by the time its current and final 84c-per-share bid – valuing Pact at about $300m market capitalisation – expires on June 7.

Shareholders holding out

Geminder and Kin, who would not comment when approached by the Weekend Australian, held about 87.6 per cent of Pact shares late this week.

Sources have indicated that there are enough shareholders holding out to scupper the takeover attempt.

Those include Harris and Gandur, who have also been buying Pact shares on the market in recent weeks, building on the stake they had initially received in late 2018 from which they emerged as the equal fifth biggest shareholders.

Together they hold 6-7 per cent of Pact shares, and The Weekend Australian has spoken to other shareholders who also don’t intend to accept Geminder’s takeover offer.

Some stock holders either simply want a higher bid price or are such fervent believers of Pact’s recycling and environmentally-friendly merits that they want to stay in the stock.

Between them all, sources said, there are enough holdouts that it is now highly unlikely Geminder will get to the 90 per cent mark.

Geminder’s camp has been calling, texting and emailing shareholders but still needs to buy 8 million shares. It is likely to be a bridge too far.

This would mean almost certainly that Geminder would have to cool his heels for another 12 months and Pact would limp along as a listed company before he applies to the ASX for a delisting.

And with that comes the prospect of Harris and Gandur (who did not comment when approached by The Weekend Australian) staying as shareholders in his private entity – while facing Pact in a Supreme Court trial set down for mid 2025.


While Pact shares now sit at 84c, they were worth $5.30 in August 2018 when it announced it was buying TIC RA from Harris and Gandur for $60m cash, paid in three tranches, and what was then about $62m in Pact shares.

Who is TIC Group?

A division of their wider TIC Group inventory and supply chain business, Harris and Gandur had built TIC RA into a supplier to garment manufacturers of plastic garment hangers and accessories like security tags. It had about 800 employees.

The business collects the hangers and accessories from retailers after garments are sold, sorts and sends them back to garment manufacturers for re-use. It played to Pact’s wider recycling and sustainability objectives.

Pact’s managing director at the time, Malcolm Bundey, said: “TIC RA’s sustainability agenda is strongly aligned with the group’s commitment to providing innovative ways to assist our customers to meet their sustainability objectives.

“We are very excited about the growth opportunities this acquisition provides Pact and look forward to welcoming the TIC RA team to the group.”

The deal included the potential of a further $30m earn-out payment to Harris and Gandur, subject to TIC RA meeting performance hurdles in 2019 or 2020.

Court documents seen by The Weekend Australian reveal that hurdle was hitting $19.4m in earnings before interest, tax, depreciation and amortisation (EBITDA) in either year.

Pact lodged a writ in the Supreme Court of Victoria’s commercial division in September 2021, claiming that TIC Group and its owners had not fulfilled criteria related to the $30m earn-out agreement.

There were also clauses relating to when an earn-out statement – containing the earnings for the financial year – had to be sent and how a dispute process involving an independent accountant would work, and the timing of when a dispute notice would need to be sent in order to trigger the dispute process.

Pact claimed an earn-out statement for the 2020 financial year, sent in January 2021 to Harris and Gandur, stated that EBITDA for TIC RA was about $17.26m – almost $2.2m short of the $19.4m threshold.

Counter claims

Pact then claimed a document it subsequently received from Harris and Gandur, headed “dispute notice” with various attachments and files, did not meet the requirements of the original sale deal because it did not set out the TIC founders’ proposed amendment to the earn-out statement and their calculation of the relevant earn-out amount.

Further correspondence included Pact arguing that later letters from Harris and Gandur were outside a 90-day deadline and arguments about whether or not a $2.5m “business interruption insurance claim” related to a Covid-19 outbreak near TIC RA premises in Ningbo, China, was included in the EBITDA calculation.

Geminder’s Pact took legal action against Harris and Gandur, seeking to restrain them from disputing Pact’s calculations and deadline interpretations, and that the business interruption insurance claim was not within the scope of a dispute.

The TIC founders countered by saying that their first dispute notice had set out amendments in a worksheet that included about $7.65m in upwards adjustments to the 2020 normalised EBITDA figure, which would have taken that total amount to $24.9m and well above the $19.4m threshold to trigger the $30m earn-out payment – and that therefore the business interruption insurance was not necessary for inclusion.

They also claimed Pact delayed about $8m in orders for hangers and garment accessories made in June 2020 which were not invoiced or delivered until July 2020 – after the end of the financial year – equating to about $5.14m in earnings that could have been used in the EBITDA calculations and also lifted it past the $19.4m mark.

Mutual rejection

Both parties have since rejected each other’s allegations and the dispute has wound its way through the Supreme Court without resolution.

Meanwhile, as business conditions have become more challenging and financial results slipped, Pact’s share price has been falling for several years.

Last September, Geminder launched a 68c-per-share takeover bid when he was sitting on just over 50 per cent of the company, to take it off the ASX.

Later, Pact’s independent directors recommended shareholders reject the first bid after an independent expert argued the company was worth between 83c and $1.24 a share.

Geminder then upped his bid to 84c per share and by January had mopped up about 85 per cent of the register.

It has been slower going since. Harris and Gander, and other reluctant sellers, have bought shares on the market and appealed to the Takeovers Panel about the bid (the panel eventually did not proceed with an investigation).

It has resulted in what now appears to be a stalemate, and there are still about 1800 shareholders on Pact’s register – and the takeover offer will not be extended.

Geminder may be forced to wait 12 months before applying to the ASX to delist Pact in June 2025, while limping along as a listed entity now outside the All Ordinaries index. He will take over as executive chairman and Pact will suspend dividend payments.

“The future value of Pact Shares is uncertain,” Kin said in a recent letter to shareholders.

Meanwhile, Pact’s legal action against Harris and Gander is set for trial in the Supreme Court of Victoria’s commercial division for about 10 days in April 2025.



Source: The Australian