Former Metcash executive blocked from joining grocery rival, but family company can buy stake

The former chief executive of Metcash’s IGA grocery chain has been blocked from investing in and becoming chief executive of struggling grocery rival SPAR Australia, following a case in the New South Wales Supreme Court.

However, Jardin’s family company, Jardin Investments, is free to complete a deal to acquire 51% of SPAR.

Louis Jardin was CEO of Metcash’s IGA division for almost 10 years until what NSW Supreme Court judge Justice Michael Ball described as “tensions” between Jardin and Metcash chief Andrew Reitzer bubbled over.

In late January, Jardin complained to Metcash’s deputy chairman about Reitzer’s conduct, only to find his position was terminated by the company’s chairman in early February.

Jardin and Metcah reached a termination agreement whereby he would be paid nine months notice, a period that started on June 1 was due to end on March 1, 2011. Metcash also paid Jardin $2.24 million in salaries and incentives owed to him for meeting performance hurdles.

But in July, Jardin entered in discussions with SPAR Australia, a struggling grocery franchisor with 150 small grocery franchisees around Australia.

Jardin put forward a proposal to buy 51% of the company for about $2 million and SPAR issued a media release announcing the deal.

Then mid-July Jardin wrote a letter to Metcash giving three months notice of the termination of his employment deed, which was still in operation while his notice period ran through until March.

However, Metcash launched legal action against Jardin, claiming that by investing in SPAR and becoming an executive would breach the non-compete clause in his employment deed. Metcash asked the court to prevent Jardin engaging with SPAR until March 1.

While Jardin told the court his investment in SPAR would be a passive one, Justice Ball refused to accept the evidence.

“In my opinion, the likelihood is that the parties contemplated at the time that the binding heads of agreement were signed that Mr Jardin would become CEO of SPAR Australia or at least take on a very senior management role,” Ball wrote in his judgement.

“It is inherently improbable that a company associated with Mr Jardin would invest $2 million to acquire 51% in a company in financial difficulties if Mr Jardin did not intend to play a key role in the company in which the investment was made.”

However, Ball disagreed with Metcash’s argument that Jardin couldn’t terminate his employment agreement before the end of his notice period.

Rather than blocking Jardin from joining SPAR until March 2011, Ball ordered that Jardin could not invest in SPAR, work for it, discuss it or compete with Metcash until November 30.

However, Jardin’s family company, Jardin Investments, is not prevented from buying into SPAR.