Just when Woolworths (WOW) thought it had put the Masters hardware disaster behind it with those deals last Thursday to close and sell off its outlets and stock, along comes its partner, US hardware giant, Lowes with legal action that could see a key part collapse.
Lowe’s said yesterday that it had filed an urgent application in the Federal Court of Australia seeking the court appoint a independent liquidator to the Masters joint venture company Hydrox Holdings to “oversee the equitable and orderly wind up" of the company.
The matter is set for another hearing before Justice Lindsay Foster in Sydney tomorrow. Lowes filed the action without warning Woolworths, indicating how badly fractured the relationship between the two is.
The appointment of an independent liquidator would bring one of the deals announced last Thursday to a halt – but not the sale of Home Hardware to Metcash, or the clearance of Masters stock.
Under the 66% (Woolies), 33% (Lowes) partnership, Woolworths needs Lowe’s approval to sell the 82 sites there the Masters stores are located around the country.
The deal was announced last Thursday would see the sites told to a consortium of Aurrum Group, Spotlight and Chemist Warehouse.
Space in some of the sites have already been sold to a number of retailers, incouding Woolies liquor chain, Dan Murphy’s.
Lowe’s legal action highlights the strained relationship between the two companies that launched the Masters chain in 2009 – there were stories earlier this month that Woolies and Lowes had done a deal. There were other stories that the two were still at loggerheads. Despite the legal action, Woolies shares only fell 0.8% yesterday to $24.70.
Lowe’s claims that Woolworths has conducted the affairs of Hydrox in a "manner oppressive and unfairly prejudicial to Lowe’s, including by wrongfully and in bad faith seeking to terminate its joint venture agreement and by seeking to exclude Lowe’s from the management of Hydrox," the company said in a statement.
“Despite every effort to reach a fair resolution with its JV partner, Lowe’s has been left with no other option but to seek the guidance of the court to achieve an equitable and orderly wind-up of the Masters business," the Lowe’s statement says.
The company said that it had acted in good faith “at every stage" in its development and operation of Masters and had been an "engaged investor, a committed partner and proud employer".
“On the other hand, Woolworths has engaged in oppressive conduct, including by invalidly and in bad faith attempting to terminate the JV."
Woolies said in a statement to the ASX yesterday afternoon that it “became aware of an ex parte application filed by Lowe’s in relation to the home improvement joint venture company” but is “yet to be served with documents relating to this application.”
The other two parts of the deal – the sale of Home Timber and Hardware business and clearance of Masters inventory – are proceeding as announced, Woolworths said.
