(Sharecast News) - Australian fashion marketplace MySale said on Wednesday that it now recommends shareholders accept a takeover offer from Frasers Group, even though it undervalues the business.
MySale announced in September that it had rejected a 2p a share, or £14m, offer from the Sports Direct owner as it materially undervalued the company and its prospects.
Mike Ashley's Frasers - which also owns House of Fraser and Flannels, among others - bought a 29% stake in MySale in June, making it the biggest shareholder.
Two months later, Frasers made the offer for the rest of the shares it did not already own. This was rejected by MySale, however, which pointed out that the offer price was a 25.7% discount to the middle market closing price on 16 August, the last business day before the bid was announced.
MySale also pointed out that 2p a share was the minimum price Frasers could have offered under City takeover rules.
However, on 3 October, Frasers disclosed that since 26 September, it had bought 100m MySale shares from investment firm Jackson Family Capital and just over 62.1m shares from company founder Jamie Jackson. Frasers also swapped its interest in contracts for difference into 1.4m MySale shares and bought just under 13.2m shares "by means of market or other purchases".
This took Frasers' stake in MySale up to 48.5%.
With this in mind, the Australian retailer said on Wednesday that it now recommends shareholders accept the offer, even though it still believes the price is too low.
MySale said that at the current level of ownership, Frasers is likely to be able to exercise "significant" control over the company, such as being able to pass and/or block resolutions at general meetings.
"As such, the board believes that Frasers's shareholding of 48.48% of the voting rights in the company represents effective control, the impact of which could be to change the strategy and capital structure of the company on a standalone basis," it said.
"Further, when considering the shareholdings of Frasers and other substantial shareholders, the board believes the significantly reduced free float in the MySale shares following the offer will further reduce the liquidity in trading of MySale shares.
"As a result, the board believes that it could be very difficult for a MySale shareholder who does not accept the offer to sell and monetise their shareholding in MySale in a reasonable timeframe without having a material impact on the price of MySale shares.
"Therefore, in considering the current and future liquidity requirements of shareholders, the board now believes the offer represents the best opportunity for MySale shareholders to realise value for their MySale shares in the foreseeable future, if they wish to do so."
Frasers Group (FRAS)
