Australia's leading adult entertainment entrepreneurs are set to do battle after Angelo Abela's company Sexyland launched a $5.2 million takeover for Adultshop.com, the Perth-based adult website led by Malcolm Day.
Abela owns a chain of 11 warehouse-style adult shops in Melbourne (he bills them as "adult department stores"), which he has built over the course of the last decade. However, this Adultshop.com play represents Abela's first big corporate play. He will fund the deal through cash reserves and a committed bank facility.
While Abela is currently overseas on three weeks holiday and could not be contacted for comment, he has billed his bid as a chance for Adultshop.com shareholders to "exit an underperforming company".
Adultshop.com listed in 1999 and had a market capitalisation of $600 million at the height of the dotcom boom. But the company's value has since fallen to $3 million and Abela argues it has racked up almost $8 million of losses in the last five years.
These problems have recently led Day, who controls 15% of the company, to consider taking Adultshop.com private and pursuing entirely different business options. In September, the company launched a $1.2 million non-renounceable rights issue that was designed to "provide funds for the review and acquisition of potential new opportunities in the technology, industrial and resources industries."
"In reality, it's not in the best interests of shareholders for the business of Adultshop.com to continue as a public company, so we've got to look at other alternatives," Day said in an interview in September.
"One of the things we're looking at is possibly selling the business out of the public company and looking at other business ventures so that shareholders can eventually make some money."
Day even said it may be necessary for him to step aside if the company pursued, for example, a push into the mining sector.
"I understand mining, I used to be a surveyor engineer so I understand it, but... if the company pursued other avenues, then the board would probably step down and the appropriate board would go on, with the appropriate expertise."
For now, Adultshop.com's directors have urged shareholders to do nothing while they review the bid.
However, Abela faces an uphill battle to win control of the company, given Day controls 15% of the company's shares and the company's other directors, Hans-Rudolf Moser and Bradley Moore, also control large stakes.
Further, Day, Moser and Moore are underwriting the rights issue and could wind up controlling as much as 50% of the company if other shareholders do no participate fully.
Not surprisingly, Abela has used his pitch to urged Adultshop.com shareholders to take up their share entitlements.
The Sexyland bid is expected to close in late November.
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