Scapa CEO withdraws resignation amid legal fight

Shares of Greater Manchester-based healthcare and industrial adhesives firm Scapa Group rose 12% on Monday after it said CEO Heejae Chae “has agreed to retract his intention to step down and will remain as group chief executive of the company to execute against the current strategy.”

On June 3, shares of Scapa Group fell 47% after it said a contract worth $30 million a year had been terminated by ConvaTec Inc. Scapa said then it had instructed external legal counsel and “will strongly contest and defend” its rights.

On May 21, Scapa said CEO Chae was stepping down as it unveiled results for the year to March 31 showing its revenue crossed the £300 million revenue milestone for the first time.

On Monday, Scapa said in a stock exchange statement: “Scapa Group plc announces that further to the announcement on 21 May 2019, Heejae Chae has agreed to retract his intention to step down and will remain as group chief executive of the company to execute against the current strategy.

“Further to the announcement on 3 June 2019, Scapa continues to prepare its response and pursue all appropriate rights and remedies against ConvaTec Inc.

“The company has taken steps to reduce the estimated impact on revenues and trading profit in FY20.

“Following a reduction in direct labour, but assuming no further mitigating actions at this stage, the estimated exposure to revenue and trading profit in FY20 could be c£28.0m and c.£13.0m, respectively.

“The figure includes the impact on other facilities which supply materials for ConvaTec products in Knoxville.

“The company will continue to assess further revenue opportunities as well as reviewing its ongoing cost base.

“The company and Scapa Tapes North America LLC (together Scapa) 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.”

Scapa chairman Larry Pentz said: “The board is delighted that Heejae has agreed to continue as group chief executive.

“The board remains committed to its strategy and believes it has the right capabilities and management to fully deliver its growth priorities and we will not be distracted by the recent claims published by ConvaTec, which we will robustly contest.” 

CEO Chae said: “I am pleased to have accepted the board’s invitation to remain as group chief executive.

“I am confident in the foundations of the company, which are strong.

“We have the right culture and excellent people in place to deliver against our current strategy, which is generating success.

“In particular, we have made significant strides in expanding our healthcare business and we are well positioned to take advantage of the many tech-transfer opportunities we are seeing in the medtech market.

“I remain fully committed to executing this strategy designed to create value for all stakeholders.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.