Manchester firm launches £66m lawsuit over cancelled contract

A Manchester wound care specialist has launched a £66m law suit against a former business partner.

In June Scapa announced that American company Convatec had cancelled a major contract.

And this morning the firm issued a statement on the Stock Market announcing it has launched a major legal action which will be heard in the US courts.

The case will be hear in Connecticut and papers have been lodged with the courts.

A Stock Market statement from Scapa said: “Further to the announcement made on 3 June, Scapa Group announces that, Scapa Tapes North America, a US subsidiary of Scapa Group, filed a complaint against ConvaTec Inc, for breach of contract with regard to a Master Supply Agreement between those respective parties, in which Scapa Tapes is claiming damages in excess of $83.81m and a declaratory judgement.

“In addition, Scapa Group plc and Scapa Tapes have filed a motion to dismiss the complaint filed by ConvaTec with regard to the MSA between ConvaTec and Scapa Tapes.”

Convatec cancelled the contract because it claimed that a non-competitor clause had been breached when Scapa acquired an American business.

At the time two years and ten  months remained on the agreement with $29,580,000 in minimum annual revenue payments owed to Scapa Tapes for each of the remaining years and months.

In May chief executive Heejae Chae announced he was standing down from the AIM listed firm.

He has since decided to retract his intention to step down and will remain as group chief executive.

Scapa says it has taken steps to reduce the estimated impact on revenues and trading profit.

In June the firm issued a statement. It said: “The company and Scapa Tapes North America LLC refute that ConvaTec has any legitimate grounds to terminate the Master Supply Agreement (MSA) with Scapa Tapes North America LLC.

“Scapa will vigorously challenge and defend its rights under the MSA in its response to the New Jersey Action. Scapa is confident in asserting its rights and pursuing appropriate remedies.”

The value of shares in the firm have fallen by more than 50% since it was announced the contract had been cancelled.