07.02.2023

Tanfield-Snorkel battle moves to 2024

At the end of last year UK company Tanfield - the previous owner of Snorkel - filed an Amended Counterclaim in the USA against Snorkel's owner SKL - a wholly-owned subsidiary of Xtreme - along with senior managers owner Don Ahern, Charles Brooks and Matthew Elvin. Its claim states that they “breached their fiduciary duties by making or allowing decisions to be made that favour, among others, Xtreme and Ahern Rentals to the detriment of Snorkel and its minority owner, Tanfield, and by taking deliberate steps to either impair the profitability of Snorkel for the purposes of lowering any amount owed to Tanfield upon the exercising of its contractual call option rights, or shift value away from Snorkel to Xtreme and Ahern Rentals, resulting in a lower valuation of Snorkel.”

It has also requested a jury trial. The net result of the amendments is that the original legal case brought by Ahern and the counterclaim will be pushed into 2024, it was originally scheduled for this summer.

Vertikal Comment

There is not much more that can be said about this saga. Tanfield ‘gifted' the 51 percent holding in Snorkel back in 2013 shortly before the company would have run out of cash. Ahern has over the years injected considerable capital and resources into Snorkel in order to turn the it around and has had some notable success.

One can understand how he might feel justified in not wishing to pay more - especially given the original terms of the deal that would only provide a pay out to the previous owners IF Snorkel reached certain EBITDA and cash flow criteria within the first five years. On the other hand it is also perfectly understandable that Tanfield might suspect that the results might have been ‘massaged’ during that time to ensure that the company missed the pay-out criteria.

Given the state of the business when Don Ahern took over, the chances that no further cash would change hands was glaringly obvious. That would have been true no matter who would have taken it over. Proving that anything like this actually happened is another thing entirely. Tanfield’s time as owner was far from stellar, to say the least. The other businesses that it was obliged to divest at that time have also not worked out as it had hoped.