Shock return for Orbach at Quarto

Shock return for Orbach at Quarto

In a dramatic move, Quarto's founder Laurence Orbach has been re-appointed as executive chairman of the illustrated publisher following a shareholder revolt, six years after he was ousted as chairman and chief executive of the company. The group also appointed fellow shareholder Chuk Kin Lau of the Lion Rock Group printing company as an executive director.

Orbach took back his previous seat as chairman after four non-executive directors were axed from the company's board during its a.g.m. on Thursday (17th May). Orbach and Lau, who together own a 47% stake in the illustrated publisher, voted to dismiss chairman Peter Read and non-directors Leslie-Ann Reed, Jess Burley and Claire Capeci at the meeting. 

In their place, Orbach and Lau were appointed to the board, along with Lau's colleague Mei Lan Lam, Lion Rock Group Limited's c.f.o. and Quarto's former chief financial officer (1987-2015) Mick Mousley, with Orbach assuming the role of executive chairman. Current chief executive Marcus Leaver was re-appointed to the board along with current c.f.o. Carolyn Bresh and non-executive director Andrew Cumming.

Also voted down was a special resolution, that would have granted power to the directors to allot shares of the company representing a maximum of 5% of the total issued shares on a non-pre-emptive basis. This would have allowed the business to raise money from shareholders and reduce its net debt.

Leaver has not responded to requests for comment on the situation. 

Paul Mumford of Cavendish Asset Management, a minority shareholder, called the shock move a "takeover on the cheap".

“A cynical person would look at this and call it a takeover on the cheap, with an in-built conflict of interest as the cherry on the cake,” he told City AM. However, the newspaper said he also welcomed a change at the company, which currently has a £47m debt burden as of the end of 2017 and a market value of £23.5m.

Quarto is understood to be a customer of Lau's Lion Rock Group printing company.

At the beginning of the a.g.m., then chairman Peter Read had said: "Trading in the first four months of the year are in line with the board's expectations."

The boardroom revolt follows Orbach's removal as chairman and c.e.o. at a special meeting in 2012. At that time Tim Chadwick, founder of Aurum Press, was installed after two shareholders criticised Orbach's stewardship of the company. Activist investor Harwood Capital had forced the move, arguing Orbach had underperformed and not created value for shareholders. At the time of his dismissal, Orbach owned a 15% stake in Quarto, still the company's largest shareholder, but since late last year he has steadily increased his stake, now owning 20%. Lau through his personal shareholdings and through Lion Rock Group Limited (which he controls), holds 27% of the company's issued share capital.

Despite Quarto experiencing some turbulence in recent times, issuing a profit warning last July and seeing off an attempt to buy the publisher by a "mystery bidder" (thought to be a Chinese publisher), along with disposing of some businesses and consolidating its publishing imprints, this latest move will have been entirely unforseen by many in the trade. 

Orbach originally brought Leaver into the business in 2012, with the intention of him becoming c.e.o. on Orbach's retirement in 2013, but the boardroom putsch accelerated this. When asked in 2016 if Orbach could return to the company in a profile interview with The Bookseller, Leaver gave an emphatic "no". 

"We have an extremely good mentor/mentee relationship, but I am running the company. I learn a huge amount from him, but I don’t always agree with him,” he said at the time. 

The company's financial results for the year to end of 2017 showed that operating profits had plunged 58% to £7.2m, although revenue had grown 1.4%to £152.4m.