(Alliance News) - Carpetright PLC shares fell sharply on Thursday after the company said it is considering a possible discounted acquisition offer from its lender Meditor European Master Fund Ltd.
The company also said it needs an GBP80 million cash injection to pay its borrowings, net debt stands at GBP27 million, meet its working capital needs and execute its "growth strategy".
Meditor's potential cash offer would value Carpetright shares at 5.00 pence each, or GBP15.2 million in total, a 45% discount to its closing price of 9.12p on Wednesday.
The shares shed 48% in response in London on Thursday morning, quoted at 4.74 pence each, giving a market cap of GBP14.5 million.
Carpetright said: "The company has been actively exploring various long-term financing solutions including standard "high street" refinancing, asset-backed lending, strategic asset sales and equity financing."
"Having now explored the viability of all of these possible options, the board announces that it is in discussions with Meditor in relation to a possible offer to acquire all of the issued and to be issued shares of the company, expected to be by way of a Scheme of Arrangement," the firm added.
Carpetright added that investment management firm Aberforth Partners LLP, which has just shy of a 13% stake, has backed Meditor's potential takeover bid.
The possible acquisition offer also is likely to get the support of Majedie Asset Management, property developer Countrywide Developments Ltd, and investment management fund Soros Fund Management LLC.
Carpetright received letters of intent from the three firms, which have a combined 11% stake in the company.
Chair Bob Ivell said: "Shareholders will be aware that we have been engaged in comprehensive refinancing discussions to replace existing facilities which expire at the end of this calendar year. The possible offer being announced today would put in place a new financing structure for Carpetright which would enable us to continue our recovery and make necessary investments in improving our business."
The company added that there is no certainty that a bid from Meditor will be made.
Turning to its trading, Carpetright said it has been performing well, despite a challenging UK retail market.
The firm said: "Group profitability is improving as the company drives store efficiency and reduces the central cost base."
"In the first half, like-for-like sales growth has been achieved in all territories, however the ongoing impact of negative consumer confidence and Brexit on the current retail environment could present a challenge in the balance of the financial year," Carpetright added.
By Eric Cunha; ericcunha@alliancenews.com
Copyright 2019 Alliance News Limited. All Rights Reserved.
