Harsh words were exchanged and a lawsuit followed, whereby BAF was awarded EUR0.5 million in penalties from the three founders of eMag. A new lawsuit was filed, this time against BAF and eventually the biggest legal conflict involving an IT&C acquisition was settled out of court.
Late 2008, start of recession in Romania. Ultra Pro Computers, one of the largest IT&C wholesalers and retailers in Romania at the time started to close some of the stores in its 55-strong network and fire people as a result of plummeting sales. Another top company on this market, Depozitul de Calculatoare, which had a 105 store network in mid 2008, started restructuring, as well.
This was not limited to mortar-and-bricks retailers that paid high rents to get the best locations in the largest cities of the country, though. eMag, the country’s largest online retailer, which had expected 2008 to be the year of spectacular growth, when sales should have reached EUR150 million was seeing its business hurt by the crisis so that it cut jobs and shaved EUR40 million off its sales forecast.
With warehouses full of computers, cell phones and all sorts of gadgets ordered in time for a December that everyone had thought would be a gift-giving month instead of the consumer spending plunge it turned out to be, retailers quickly realized that they were now aiming for survival instead of growth.
Store owners had sunk their money into products that no one was buying and were feeling the increasingly heavier pressure from the rest of the partner chain – banks, wholesalers and producers; everyone suddenly demanded to be paid on time and in cash, and black lists of companies no longer meeting payment deadlines started to circulate on the market.
In December 2008, one month after eMag had publicly confirmed information already circulating on the market, that it would cut its sales target and lay off people, sources had already revealed that the online retailer was looking for a way out by selling a stake. The first rumor confirmation came from Horia Manda, the manager supervising the BAF fund, who told ZF that he did discuss with eMag but denied any deal.
A few months later, on April 24, 2009, Asesoft Distribution announced it was the new majority shareholder of the retailer, having bought 51% from the three founders, Radu Apostolescu, Dan Teodosescu and Bogdan Vlad. A month before, Iulian Stanciu, shareholder and chief executive of Asesoft Distribution had somehow foretold the announcement of the acquisition of eMag, when he had said that the crisis had melted entrepreneurs’ egos and created room for talks.
Two months after the deal was announced, during which time no one knows whether BAF and eMag’s founders had any differences, Horia Manda told ZF in an interview that he had sued the three and there was tension in his words: “The eMag shareholders thought there was a better solution for them. They forgot that we had an exclusive deal. This created a legal conflict and a suit was filed against them in court. I believe it is important to have mutual respect and contractual discipline in transactions.”
The response of eMag, sent by Radu Apostolescu to ZF added fuel to the already existing tension: “There was an exclusive deal, indeed, but it was signed five months ago and was valid for three months. The contract expired a long time ago and as such cannot affect the deal closed with Asesoft. I don’t believe they will file suit because they don’t stand a chance [of winning].”
The media forgot about the story, but the lawsuit went on, keeping lawyers and judges busy. According to the Bucharest Court of Law data, case number 33009 dated August 11, 2009 shows Balkan Accession Fund, represented by law firm Tuca si Zbarcea, as seeking legal remedy from Radu Apostolescu, Dan Teodosescu and Bogdan Vlad. Less than a year later, the court delivered a ruling, whereby the three were required to pay EUR500,000 in lei at the central bank exchange rate valid on the day of the payment as contractual penalty and a further EUR65,000 converted in lei in auditing costs. They were also required to pay RON27,903 in court fees together, as well as EUR3,500 in attorney’s fees. The ruling was possible to challenge in court.
None of the parties commented on their legal battle, but went on, according to the data on the Bucharest Court of Law website. Case 54250 of November 10, 2010 shows the three eMag founders suing BAF and asking the court to certify invalidity of a document, probably the exclusive contract that Horia Manda talked about.
However, after more than two years of conflicts and lawsuits, the two parties seem to have reached an agreement to end what is likely the longest legal battle over an acquisition of a local IT&C company.
“Both [suits] were settled by a business agreement,” Radu Apostolescu, the only eMag founder who still owns stock in the retailer told ZF, without getting into details.
Horia Manda declined comment when contacted by ZF.
eMag founders Bogdan Vlad and Dan Teodosescu sold all their remaining shares in the retailer, about 30% at the end of last year to the majority shareholder, Asesoft Distribution, controlled by businessmen Iulian Stanciu and Sebastian Ghita.
(English version by Loredana Fratila-Cristescu)