Listed toy maker Funtastic, which counts Lachlan Murdoch among its shareholders, has launched legal action against veteran rag trader Jeff Moss over the sale of a business unit in 2009.
Funtastic, which was been struggling to restructure its business and reduce debt in the last 18 months, first announced in August 2009 that it had sold its apparel business to Moss’ Australian Horizons Trading for about $5.4 million.
Moss is best known as the founder of the Pretty Girl Fashion Group, in which James Packer was an investor.
Funtastic’s apparel division made children’s clothing under license for kids brands such as Bob the Builder, Thomas the Tank Engine and The Wiggles.
The deal also allowed Funtastic to take a share of 2010 sales, which were expected to be no less than $3 million but capped at $5 million.
However, Funtastic revealed in a recent trading announcement that it has launched legal action against Australian Horizons Trading and Moss, seeking $2.25 million in unpaid debts, an order to pay commissions earned from June 2010 to December 2010, unspecified damages and interests and costs.
Funtastic says Moss provided personal guarantees over “certain AHT obligations under the 2009 sale of business agreement”.
Further complicating the deal is the fact that Australian Horizons was purchased by Melbourne-based Playcorp, a retail and homewares group which is run by Steven Lew, son of retail veteran Solomon Lew. Playcorp has estimated annual revenue of $220 million.
Despite the complex nature of the legal claim, Funtastic appears confident of getting its money back.
“Funtastic booked an asset at the time of the sale of the apparel business based on the expected future cash receipts. This amounts to $5.8 million at June 2010. The company is of the view that the full amount will be recovered and that no impairment is therefore warranted at this stage.”
Funtastic and Jeff Moss were not available for comment prior to publication.
Playcorp declined to comment.
Moss told SmartCompany at the time of the Funtastic purchase that he was looking forward to leveraging his company’s clothing industry experience with Funtastic’s strong children’s brands.
“I’m very comfortable with the apparel business. This is the space I’ve been in for 25 years,” he said at the time.
Moss is a 25-year veteran of the ragtrade. He started Pretty Girl Fashion Group in 1989 and later sold half of the business to the Packer family in 2000. He co-founded Tigerlily Swimwear in 1999 with Johdi Meares, acquired the Rockmans Retail chain from Woolworths in 2000, bought the Table Eight business in 2005 and acquired the Wombat chain in the same year, taking Pretty Girl’s retail footprint to 2,005 stores.
He sold out of Pretty Girl in 2006 but remained in the rag trade, manufacturing clothing under license (one of his most successful brand is the Boom Doggers kid’s brand) and also manufacturing generic brands for discount department stores including Target.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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