Kathmandu directors have rejected a “highly opportunistic” hostile takeover offer from Briscoe Group, which they say is timed to exploit the company’s recent share price struggles.
The outdoor equipment chain directors have unanimously recommended that the company’s shareholders reject the offer made in late June, which is worth more than $300 million.
“Briscoe’s offer is manifestly inadequate and does not reflect the value of Kathmandu’s shares,” Kathmandu chairman David Kirk said.
Auckland-based Briscoe 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.
The company 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.
“The timing of the offer is highly opportunistic, timed to exploit Kathmandu’s recent share price underperformance,” Kathmandu directors said in a statement.
Kathmandu stock has slipped about 15 per cent in the past five years and has dropped 45 per cent in the past 12 months.
Briscoe shares last traded at $NZ2.94.
“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.
Kirk said the offer came off the back of an isolated period of internal and external challenges facing the outdoor goods retailer in the period leading up to and including the third quarter in the 2015 financial year.
“I am confident that management can deliver strong results that will, over time, result in superior value for Kathmandu shareholders,” he said.
Kathmandu also provided a trading update for FY2015. Sales rose 4.2 per cent to NZ$409.4 million, however Net Profit After Tax fell 49.3 per cent from NZ$41.2 million in FY2014 to NZ$20.9 million in FY2015.
“Over our winter sale promotion we improved both sales and gross margin year on year, which was a significantly better performance than our Christmas and Easter campaigns,” said Kathmandu CEO, Xavier Simonet, who took up the role in July just prior to Briscoe’s offer.
“There was a strong uplift in sales to Summit Club members, especially in Australia, and our gross margin performance was especially satisfying. This reflected a shift in promotional strategy to emphasise out product range newness, technical features and benefits rather than just absolute price and discount messaging.”
