(Alliance News) - Womenswear retailer Bonmarche Holdings PLC said on Wednesday it still believes Spectre's takeover offer undervalues the business, but now recommends shareholders accept the deal.
In April, Spectre - a Dubai-registered company 100% owned by Edinburgh Woollen Mill owner Philip Day - approached the fashion retailer with a GBP5.7 million offer.
The offer is priced at 11.445 pence per share, which marked a 34% discount to Bonmarche's GBP8.7 million market value the day before the offer was made. The mandatory offer came after Spectre acquired 26.2 million shares, giving it a majority 52% stake in Bonmarche.
Shares in Bonmarche closed at 15.5p on Tuesday in London.
This change of heart from the struggling retailer came as Bonmarche reported a "poor" performance in the first quarter of the new financial year due to continued weakness in the underlying clothing market and a lack of seasonal weather.
"It is early in the financial year, and the achievement of a [pretax profit] result which is in line with the board's expectations is possible, but there is a significant degree of uncertainty attached to this, and risks are more heavily weighted towards the downside," the retailer cautioned.
In light of this uncertainty, Bonmarche's auditor, PricewaterhouseCoopers, suggested during "informal" discussions that without a clear indication of an improvement in trading prior to the date the 2019 accounts are due to be signed, it "may include an emphasis of matter reference in its audit report due to the uncertainty with regard to going concern".
While Bonmarche said it continues to believe Spectre's takeover offer "does not adequately reflect the potential longer term value of the business", heightened uncertainty makes the "certainty" presented by the deal more attractive in the short term.
As a result, Bonmarche said it is now of the view, supported by advisor Investec, that the terms of the offer are fair and reasonable, and recommends shareholders take up the deal.
"The board believes that once the near term has been weathered, the medium and long term prospects for the Bonmarche business are good," the company said, adding: "The board continues to welcome the opportunity to engage with Mr Day, who has, as yet, not taken up the offer to discuss future plans for the business, and believes that, with his sector experience, he would be a successful long term owner."
