Samsonite CEO Ramesh Tainwala has resigned with immediate effect “in the best interests of the company” as the fallout from a short-seller report on the company’s reputation and share price continues.
Tainwala will be replaced immediately by CFO Kyle Gendreau.
Hong Kong-listed Samsonite’s stock value plummeted more than 20 per cent during two days last week, before trading was suspended, leaving it with a valuation of about US$4.8 billion.
That followed the release of a report by Blue Orca accusing the world’s largest luggage maker and retailer of questionable accounting practices and questioning its engagement in third-party related transactions with entities owned by Tainwala.
But in a statement issued overnight, chairman Timothy Parker said the Samsonite CEO was stepping down due to issues with his academic qualifications.
“While the board notes that since the company’s IPO in 2011, its disclosure of Ramesh’s educational background has been accurate, the board also takes seriously the allegation that has been made about his academic credentials. Ramesh tendered his resignation, citing personal reasons. In considering such resignation, the board thoroughly reviewed the facts related to this allegation and has determined that accepting Ramesh’s resignation is in the best interests of the company and its shareholders.”
Tainwala has overseen solid growth of Samsonite in recent years, including the acquisition of luxury travel brand Tumi.
Parker paid tribute to Tainwala’s “dedication and many contributions to the success of Samsonite” over the years. “During his tenure the company has continued to achieve strong revenue and earnings growth.”
Gendreau takes over
Kyle Gendreau has served as an executive director of Samsonite since March 2011, previously serving as CFO and an executive director of the consolidated group since January 2009.
“Having served as a senior executive of Samsonite for many years, Kyle possesses a strong understanding of our industry, significant financial management experience across retail and consumer products, as well as deep institutional knowledge of Samsonite,” said Parker.
“Samsonite has a proven record of solid growth and value creation since its initial public offering in 2011, and Kyle has played an instrumental part in achieving these results. The board is confident that under Kyle’s leadership, the company remains well-positioned to continue executing on its multi-brand, multi-category and multi-channel global strategy to capitalise on the growth opportunities ahead and to enhance long-term value for shareholders.”
Gendreau’s appointment can be interpreted as the ultimate endorsement of its position on the Blue Orca report, given his long tenure overseeing Samsonite’s financials.
“One-sided and misleading”
In a separate statement overnight, Samsonite formally responded to the damaging report, opening with a warning to shareholders that Blue Orca is “a self-proclaimed activist investment fund that is focused on short selling”.
“In the short-seller report, Blue Orca cautions investors that it has a “short interest in Samsonite’s stock and therefore stands to realise significant gains in the event that the price of Samsonite stock declines”.” It has declined by 20 per cent since the report’s release.
The luggage giant’s board said it had thoroughly reviewed the allegations in the report and determined that they are “one-sided and misleading” and that conclusions drawn regarding its financial results are incorrect.
On the allegations of irregular third-party related transactions, Samsonite’s board said continuing connected transactions are entered into in the ordinary and usual course of business of the group and are either on normal commercial terms or on terms that are no less favorable than available with any other third party.
“The company has robust internal procedures to ensure that all continuing connected transactions have been identified, and appropriately reviewed and disclosed, in accordance with the Stock Exchange’s listing rules. Those transactions have been subject to annual review and approval by the company’s disinterested directors and independent non-executive directors in compliance with the requirements of the listing rules, and review by the company’s internal audit department. This process, which is performed in connection with the publication of the company’s financial results, helps to ensure that all continuing connected transactions have been identified and properly disclosed. In addition, the company’s external auditors, KPMG, perform annual limited assurance procedures related to continuing connected transactions.”