How fair play turned to success
GERALD RUBENSTEIN turned Profurn around purely by accident. He was a director of its parent company Supreme Holdings, which together with Supreme Investment Holdings, was placed in provisional liquidation in 1992.
Rubenstein had known Edward Ronbeck, the Supreme group's founder, for many years. He says: "He was a lawyer who had worked for me in the early days of my legal practice. When he asked me to sit on the Supreme Holdings' board, I accepted. I ought to have made better inquiries about where its money was coming from, but Ronbeck was my mate and I didn't.
"When the company went down, my name went with it. Even though I had no financial stake in it, I believed it was my duty to help put things right."
The foundations for Profurn's link to the "Supreme debacle" were set in 1989, when Supreme took over furniture company Sam Steele Holdings, which held the furniture chain and other manufacturing interests, in a deal worth around R43-million.
Supreme also bought Victoria Lewis's furniture operations and merged these with its own, changing the listed company's name to Protea Furnishers. It then sold its manufacturing assets and added two new chains, one of which was Supreme Furnishers.
While Profurn traded profitably, its earnings see-sawing from year to year, its holding companies were issuing debentures to the public to supposedly fund their listed subsidiaries. In addition to Profurn, these subsidiaries included Supreme Industrial Holdings and Supreme Manufacturing Holdings.
The debentures, however, promised interest rates which these underlying assets could never sustain and were pushed through hard sell agents - facts Rubenstein claims he knew nothing about.
By the time the Supreme group was placed in provisional liquidation in 1992, its 7 000 debenture holders were collectively owed R270-million.
To recover the money, the liquidators had to decide whether or not to liquidate Supreme's subsidiaries, including Profurn.
Rubenstein stepped in and to save Profurn, he persuaded them to capitalise its loan account of R45.4-million to its holding companies. They agreed and 252 million Profurn shares were issued at 18c each to the liquidators, giving them a 91.4% stake in Profurn.
Following this, Profurn was once again able to secure credit from its suppliers and the liquidators agreed to sign service contracts with its top management - a move which boosted its staff's sagging morale.
Rubenstein says: "The group was profitable but it faced tough conditions. Control still rested with the liquidators and I had to get that right."
His next step was to bring in German entrepreneur Claas Daun. At the end of 1993, Daun bought 55% of the shares owned by the liquidators for R17.8-million or 10c each - a move which gave him 50.1% of Profurn. With this purchase, a new era dawned for Profurn. The group was restructured and was able to buy Barnetts.
Rubenstein says: "One year after the first lot of the shares went to Daun, we placed most of the shares held by the liquidators at 25c a share with a major institution."