125-year-old CNA placed in business rescue

Stationery retailer CNA – which has been around for 125 years – has been placed in business rescue, its management team confirmed on Tuesday.

Business rescue means that a company gets breathing space from debt and other repayments, while business rescue practitioners take full management control. They then decide whether the business can be restructured to survive.

Failing that, they would aim to achieve a better return for the company’s creditors and shareholders than an immediate liquidation of the company would.

CNA hard-hit by Covid-19

Fin24 previously reported that CNA is behind on payments to suppliers and landlords. The retailer has been hard-hit by the Covid-19 pandemic, which kept customers out of the country’s big malls, and its stores.

One of its suppliers is Jonathan Ball Publishers, and its CEO, Eugene Ashton, told Fin24 that he believes going into business rescue will be a positive development for CNA. Ashton said:

“It will at least give them a chance to try rectify things. It was always going to be difficult taking over the business during the Covid-19 pandemic”.

“Business rescue is a logical consequence, and I am sure suppliers will work with them [CNA] to try [to] see if they can take themselves out of this situation. This is the right course of action and probably the best one too, for suppliers. There is no point in liquidating the business now because there are no material assets.”

Business rescue in April 2020

Tashya Giyapersad and Simi Maharaj have been appointed as CNA’s business rescue practitioners, a director of the retailer confirmed.

CNA’s former owner Edcon was placed in business rescue in April last year, with all of its assets eventually sold off. Edcon sold CNA to an investment group, Astoria, with Exclusive Books’ former CEO Benjamin Trisk also taking a 30% stake. Astoria sold its 70% stake back to management last month.

Trisk is currently at war with the CNA board. Directors accused Trisk of contacting business rescue practitioners without their consent and then announced that he had resigned in April – which Trisk disputed.

CNA’s long history

If the business rescue process fails, it could close the door on a company that has been part of South African lives for more than a century.

Founded in 1896 in Johannesburg by Michael Davis and Albert Lindbergh, Central News Agency or Consolidated News Agencies, a seller and distributor of newspapers, by 1904 had stores across the country and continued to expand to meet demand for news during World War 1.

Both the Rand Daily Mail and Sunday Times were published by CNA by 1906.

In 1983, CNA merged with Gallo Africa to form CNA Gallo, the company that acquired cinema chain Nu Metro in 1990 and proceeded to fully buy it out in 1992.

Wooltru, a retail investment company, bought ailing CNA in 1995 from Gallo Africa in a deal valued at about R500 million. The acquisition was funded by the issue of Wooltru shares. When Wooltru encountered problems of its own, it unbundled assets and winded down, and CNA was offloaded.

Sold for R192 million

Wooltru later sold CNA to Gordon Kay & Associates for R192 million in February 2001. The conditions of the transaction were that Gordon Kay & Associates would pay R30 million as an initial payment and a further R54 million after.

However, in an inquiry, Mark Gordon – the chairperson – admitted that Gordon Kay & Associates had no assets and that some of his personal assets had been earmarked as part of the transaction.

Edcon then acquired CNA in 2002 for R130 million. Five years later, Edcon was bought by American investment firm Bain Capital in a debt-funded deal, and delisted from the JSE.

It didn’t end well. By 2016, Edcon was drowning in debt and Bain handed the company to its creditors. The company ended up in business rescue, and was dissolved last year, with all of its subsidiaries sold off.