The Briscoe Group has responded after the board of Kathmandu rejected the company’s takeover offer, saying its proposal fully reflects the value of Kathmandu shares.
Briscoe Group MD, Rod Duke, said he did not expect the Kathmandu board to “simply throw up a catalogue of excuses.”
“It is a tough retailing market out there,” Duke said in a statement.
“As retailers we accept that, and seek to develop and implement strategies to ensure that we outperform our competitors, and some of us have seen good results. But I did not expect the Kathmandu board to simply throw up a catalogue of excuses as to what it got wrong and to expect shareholders to accept it.
“Anyone who follows Kathmandu closely will know that same store sales growth across the group has been in decline for the past four years. The failure to address this was always going to catch up with the company. As Kathmandu’s largest shareholder its latest performance gives us little confidence in its 2016 full year forecast, which in our view are based on ambitious assumptions that come with enormous execution risks.”
Yesterday Kathmandu directors said in a statement, “the timing of the offer is highly opportunistic, timed to exploit Kathmandu’s recent share price underperformance.”
Auckland-based Briscoe, which owns a 19.9 per cent stake in Kathmandu. is offering Kathmandu shareholders five Briscoe shares for every nine Kathmandu shares as well as NZ20 cents, in a bid to buy the remaining 80.1 per cent stake it doesn’t already own.
Kathmandu says its independent adviser, Grant Samuel, had concluded that the full underlying value of Kathmandu’s shares (on a control basis) is in the range of $NZ2.10 to $NZ2.41, well in excess of the implied value of the offer of $NZ1.80.
“Briscoe can afford to offer a lot more for the Kathmandu shares and is not sharing enough of the benefits of the transaction with Kathmandu shareholders,” Kathmandu directors said.
Briscoe believes Kathmandu’s share price would have headed further south if it wasn’t for its takeover bid.
“The 2015 full year earnings figures came in well below what we had expected and well short of analyst consensus forecasts,” Duke said.
“In the absence of our takeover offer, it is highly likely that the Kathmandu share price would have suffered a significant downward correction from the NZ$1.39 price as at market close immediately prior to Briscoe Group announcing its 19.9 per cent shareholding.”
Duke said the Briscoe offer remains on the table until September 17.
“We believe that Kathmandu is a great brand and has good products, but by its own admission is failing to execute basic retailing fundamentals. Nothing in Kathmandu’s target company statement provides confidence that management is able to deliver a turnaround and achieve its lofty earnings forecasts. We believe that it makes enormous sense to join the Kathmandu business with ours to create a bigger, better, and stronger retailing group to the benefit of both companies’ shareholders.”
