(Sharecast News) - The £23m sale of Moss Bros is under threat after the private investors making the acquisition attempted to back out amid the Covid-19 crisis.
Moss Bros said Brigadier Acquisition, the bid vehicle, had applied to the Takeover Panel to withdraw its offer for the clothing retailer and formalwear hire group.
The company said it would oppose Brigadier's request and was backed by one of its biggest shareholders, who said the situation was a test of the City's resolve.
Moss Bros said the UK takeover code barred a bidder from pulling out of an acquisition unless circumstances giving it the right to do so "are of material significance to bidco in the context of the offer".
The company said: "The board ... will take all necessary action to make its case that those requirements have not been met and that the offer should not therefore be permitted to lapse."
Moss Bros shares fell 23.3% to 15.72p at 11:41 BST - well below the offer price of 22p a share.
Brigadier agreed to buy the 169-year-old company for £22.6m in cash on 12 March - the day after Covid-19 was declared a pandemic. Brigadier is led by Menoshi Shina, the US-based owner of Crew Clothing.
Two weeks after the deal was announced the UK government ordered the closure of non-essential shops. Moss Bros shut all its stores and published a profit warning on 23 March.
Nick Burchett, a fund manager at Cavendish Asset Management, which has a 6% stake in Moss Bros, said Brigadier should have changed its mind soon after the virus was declared a pandemic if it was going to do so.
"While I thought the timing of the deal was opportunistic but unwise in March with the crisis looming on the horizon, you can't back out of a deal at this stage," Burchett said.
"It would be disgraceful if the takeover panel allows Brigadier to walk away. If the Moss Bros acquisition falls through it could start a worrying trend for future deals. This is a test for the City at a tricky time. It shouldn't waver."
Brigadier had promised to invest in Moss Bros under private ownership while cutting procurement and administration costs. Brigadier also pledged to minimise store closures and job cuts.
Moss Bros was already under pressure in a weak economy and with fears mounting about the economic impact of Covid-19. Since then the world economy has plunged into what is expected to be the worst downturn since the Great Depression.
8 Jul 2016 13:53