US firm’s bid ‘opportunistic and unfair’
PAS Group’s independent board committee (IBC) setup to evaluate the $69.7 million takeover offer by US-based firm, Coliseum, has unanimously rejected the “opportunistic bid” deeming it as unfair market value.
Coliseum has gained control of the apparel and sports retailing group, as a result of its unconditional offer and is now holding shares in PAS of approximately 54.33 per cent.
“Based on Coliseum’s extensive research and its discussions with leadership at PAS, the bidder believes that PAS is well-positioned with seasoned management and a talented employee base to continue to drive profitable growth,” Coliseum said in a statement.
“PAS’s ownership of a collection of storied Australian brands and ability to fill an underserved niche in the Australian market has the potential to continue creating meaningful value.”
Citing an independent expert’s report from accounting and advisory firm, ShineWing Australia, which found the offer to be “neither fair nor reasonable”, the IBC set up to respond to the offer has recommended the company’s shareholders reject the offer.
The IBC comprises the directors who are independent of Coliseum; chairman Rod Walker, board member and chair of PAS’ audit and risk committee, Craig Holland and CEO Eric Morris. PAS directors Adam Gray and Matthew Lavelle are nominees of Coliseum and have not participated in the IBC’s deliberations.
“The IBC considers that you will be better off retaining your PAS shares, rather than exiting your investment in PAS for $0.51 cash per share by accepting the offer,” said Walker in a letter to shareholders. He added that the offer was “opportunistically timed to exploit the susceptibility of PAS shares to significant price fluctuations on small volumes”.
Specifically, he said, the timing coincided with the low closing price for PAS shares of $0.49 on June 15, being the last trading day before the offer was announced. Over the last 12 months, the closing price of PAS shares has been as high as $0.80 in the last 12 months.
ShineWing has estimated the fair market value of PAS shares to be in the range of $0.64 to $0.71. PAS’ board of directors had previously knocked back a bid by Coliseum, arguing it undervalued the company in 2015. The offer period closes on 10 August.
International ambitions, local expansions
Speaking to IRW, Matthew Durbin, chief financial and operations officer for PAS Group, said Coliseum’s offer sitting well below the independent expert’s valuation range was the “predominant reason” for the IBC’s recommendation that its company shareholders reject the bid.
“There are three other reasons outlined in the target statement that relates to the fact shareholders might lose the opportunity to sell shares at a higher price later on and that the offer doesn’t value future opportunities for the organisation,” he said.
Commenting on the strength of the apparel and sportswear group’s stable of brands, Durbin said there were significant opportunities throughout the company’s retail network, including international expansion, new licenses and online growth – with the potential for brands such as Review to launch on Alibaba and even Amazon when it arrives. A principle agreement has been reached with Tmall Global to launch Review Alibaba, expected to take place within the next six to nine months.
“Review is a strong vintage-inspired brand with about 110 stores and has a unique position in the market with few direct competitors,” he said.
Durbin said premium swimwear brand, Jets, has experienced incremental growth online and possesses “significant opportunity” in the US, where it is stocked in major department store Neiman Marcus, independent swimwear chain Everything But Water, plus Selfridges in the UK.
Through its Designworks business, Durbin said the company has recently acquired a new major sports license, which is yet to be announced due to commercial sensitivities, to join its Everlast, Dunlop and Slazenger brands.
In its target statement, the IBC said the expected imminent arrival of Amazon in Australia is likely to have an impact on the retail sector, with the extent of that impact uncertain and likely to be limited to specific product categories and selected retailers.
“Not all customers are comfortable purchasing apparel online, and not all customers are price/volume orientated,” said the IBC.
Conversely, the IBC said Amazon’s arrival may also present an opportunity for PAS to pursue new distribution channels; including placing its branded products through Amazon Marketplace. PAS now has a total of 258 stores and is currently opening 12 David Jones concessions.
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