Firm to take legal action after multi-million pound contract cancelled

A firm that specialises in wound care products and industrial tape is to take legal advice after losing out on a multi-million contract.

Manchester based Scapa was informed on Friday that Convatec was cancelling a supply agreement worth £23m a year.

Three years of the five year deal still remain.

Scapa say that the company has no grounds to cancel the contract and is taking legal advice.

The firm added that it will issue further statements on the likely effects on its profits.

The AIM listed company issued a statement on the Stock Market this morning.

The statement said: “Scapa Group announces that on Friday 31 May after the market closed, Scapa received notice from ConvaTec Inc. (ConvaTec) that it was terminating the Master Supply Agreement (MSA) with Scapa Tapes North America LLC; accompanying the notice was an action for a declaratory judgment concerning the MSA filed by ConvaTec in federal court in New Jersey.

“Neither the Company nor Scapa Tapes North America LLC accept that ConvaTec has any grounds to terminate the five year supply agreement in respect of which a three year term remains, nor to pursue its declaratory judgment claim.

“The company and Scapa Tapes North America LLC have instructed external legal counsel and will strongly contest and defend their rights under the MSA and in response to the New Jersey action in which it will assert and pursue all appropriate rights and remedies.

“The MSA provides for a binding contractual commitment for a minimum circa. US$30m of revenue per annum.

“The company is assessing the potential profit implications and will issue a further update accordingly.”