Thought of the Day - January 18 2022 - Business During the Pandemic

I have been following two fascinating stories concerning the effect of the pandemic on business.

The story of Crocs:

The Crocs company, founded by Lyndon "Duke" Hanson, and George Boedecker Jr., was formed to make foam clogs, originally as a boating shoe. They acquired the foam product Crostilite and manufacturing technology from Foam Creations, of Quebec City. The first model, the Beach, was unveiled at the 2001 Fort Lauderdale, Florida Boat Show.

Crocs have since sold 300 million pairs of shoes. Their business has continued to grow dramatically thanks to the work-from-home pandemic measure. Sales of Crocs were two-thirds greater in 2021 than in 2020.

It also seems the simplicity of the company's clog manufacturing makes them largely immune to supply-chain issues. When COVID lockdowns were announced in Vietnam they simply moved production to another country!

Now Crocs is positioning for the return to the office. They said they would buy privately-held "comfy footwear" company Heydude for $2.5 billion. Crocs are hoping the Heydude shoes, which are easier on the eye than Crocs' clunky creations, might start workers, returning to their offices "rediscover business casual".

The story of Cineworld and Cineplex:

Back at the end of 2019 Cineworld, a UK-based cinema giant, submitted a takeover bid for Canada's Cineplex theatre chain for $2.8 billion. Of course, the pandemic took the shine off the deal as both companies started reporting massive losses as 2020 progressed. In June 2020 Cineworld tried to back out, claiming Cineplex was responsible for “material adverse effects and breaches". Last month the Ontario Supreme court ruled against Cineworld for breach of contract and awarded Cineplex $1.24 billion.

While I am sure there is other legalese involved and counterclaims will be filed, there is an unreported story concerning this judgement. It seems after the SARS 1 outbreak 20 years ago Canadian contracts, particularly in Ontario, were tightened up. Indeed the agreement contained a clause exempting "outbreaks of illness" as a cause for "material adverse effects"!

The case is now seen as potentially precedent-setting for other companies that may be embroiled in their own litigations over abandoned acquisitions and material adverse effects caused by the COVID-19 pandemic. I am sure lawyers everywhere are now going through existing contracts, and that the big four consulting companies are adding another chapter to their "how-to-pandemic-proof-your-business" seminar series.

Fascinating.

Cheers

Cliff