Courts Could Decide Control of Hanover Direct

A New York court could decide multititle cataloger Hanover Direct’s future. All that needs to be decided is the little matter of who’s the rightful owner of some 30 million shares.

According to documents filed with the Securities and Exchange Commission (SEC), Chelsey Direct in May purchased 29,446,888 shares of Hanover common stock and the 1,622,111 shares of Series B preferred stock from Luxembourg-based Richemont Finance. On July 17, Edgewater, NJ-based Hanover filed an action in the Supreme Court of the State of New York against Richemont and New York-based Chelsey.

Hanover maintains that Richemont sold the shares to Chelsey while in the possession of confidential, material nonpublic information concerning Hanover that it had received from the cataloger. According to Hanover, a confidentiality agreement barred Richemont from using the information other than in connection with its relationship or business with Hanover, whose titles include Domestications, The Company Store, and International Male.

The May deal gives Chelsey two seats on Hanover’s board of directors. But if the court rules in Chelsey’s favor, Chelsey wants to convert its current Series B preferred shares into a combination of Series C shares and common stock—a move that would give Chelsey control of Hanover.

As a result of a July 30 hearing, Hanover agreed to the temporary registration of the shares in Chelsey’s name, pending the resolution of the litigation. The date of the next hearing has not yet been set.

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