// Bonmarche directors send note to shareholders urging them to reject Philip Day’s takeover bid
// Day bought 52.4 per cent of the struggling fashion retailer, triggering a mandatory takeover bid
// Bonmarche said Day’s offer “materially undervalues” the retailer
Bonmarché’s board of directors have urged shareholders to reject a takeover bid by Edinburgh Woollen Mill owner Philip Day.
Last month, Day’s Spectre Holdings company purchased more than half of Bonmarché’s ordinary shares, triggering a mandatory takeover bid.
City rules stipulates that a shareholder must make a takeover offer once their stake in a company surpasses the 30 per cent threshold.
Spectre bought more than 26 million shares, representing 52.4 per cent of the struggling fashion retailer.
It also offered to buy the remainder of the shares for the price it paid, at 11.45p.
In the immediate aftermath of the offer, Bonmarche told shareholders to “take no action”, deriding Day’s offer as too low.
The retailer has now sent a note to shareholders, in which directors unanimously recommend that shareholders reject the offer.
They said Day’s offer “materially undervalues” Bonmarche and add that cost reduction measures, which have been implemented, should strengthen the business.
“The delivery of this cost reduction programme should result in the improved operational and financial performance of the business,” the note to shareholders read.
“Accordingly, the Bonmarché directors consider that, whilst being both immediate and certain, the cash value of the offer is unattractive when compared to the shareholder value that the Bonmarché directors aim to create in the medium term.”
At the time of Day’s takeover offer, Spectre said it would undertake a profitability assessment on Bonmarche’s estate of more than 300 stores and close down under-performing sites or reduce costs by cutting the number of staff or seeking a lower rent.
The offer followed Bonmarche’s third profit warning in just six months in March after total sales for the 13 week period ending December 29 – which included the crucial Christmas trading period – dropped 8.1 per cent year-on-year.
The retailer now estimates that the underlying loss before tax for the 2018/19 financial year will be between £5 million and £6 million.