Fri, 15 Nov 2019

A strategic leadership consultancy, Metaco, acquired by Comair in July last year, now accuses the aviation company of reneging on the agreement and "grinding it into the ground in the process".

Comair operates its own low-cost brand, kulula.com as well as British Airways, as part of a license agreement.

Fin24 reported in September last year that Comair acquired Metaco as part of its diversification strategy, with a view to establishing an innovative academy for the global aviation sector. In addition, according to a statement issued by Metaco on Thursday, it was to continue providing team and leadership development at commercial rates to support "intensifying change" in the Comair Group, and also consult to the external client base.

At the time, then-Comair CEO Erik Venter said the acquisition fitted well with Comair's training business that already encompassed courses for pilots, cabin crew, ground operations staff, and travel and tourism.

Comair said at the time it had already worked extensively with Metaco over the past two years.

According to the Metaco statement, Comair bought a 100% stake for R33.5m, with a down payment of R12.8m, and the balance of the total purchase price to be paid on an earn-out basis over six years.

According to Metaco, the use of its services by Comair was, however, cut back by 80% within six months of the acquisition, as part of the aviation company's cost-cutting measures.

Metaco further claims that in May 2019, changes were made to the strategy for the aviation academy, which severely compromised its (Metaco's) income and profitability.

Comair profit jumps 184% thanks to R1bn from SAA

Venter resigned as CEO of Comair in May 2019. His role was taken over by joint CEOs Glenn Orsmond and Wrenelle Stander as from the end of July this year.

According to Metaco, the (then) future joint CEOs met with the founders of Metaco in June this year and "instead of learning more about the business, they immediately alleged that Metaco was insolvent, and informed the founders that, as a result, they were in breach of the sale agreement".

Metaco says a loan facility provided by Comair was summarily withdrawn and a demand made for the founders to personally restore solvency, including reimbursing R1.7m drawn down from the loan. Furthermore, Comair required the sellers to capitalise Metaco for a further 12 months.

'Just a shell'

Metaco claims the "sudden about-turn" when Comair sought to disinvest from it within a year, left Metaco's owners "with just a shell of the thriving company they previously had".

Accordingly, Metaco says it has instigated arbitration proceedings against Comair to resolve the dispute.

Metaco founder and MD Barbara Walsh denies that the company has ever been insolvent.

Comair responded to Fin24 that it holds itself to the highest standards in its business operations and has done so for more than 73 years.

"We hold our business partners to the same high standards. Unfortunately, not all mergers and partnerships work out and that was the case with Metaco. The matter is subject to litigation and we do not intend to conduct those proceedings through the media," Comair told Fin24.

Fin24 reported in September this year that in its results for the year to end-June, Comair announced that its headline earnings per share were 184% higher than in the previous year. This is a "direct consequence" of a massive payout it is getting from SAA. Comair won a legal settlement from SAA after a fight about SAA's incentive scheme for travel agents, which was in place from 2001 to 2006.

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