(Alliance News) - MySale PLC on Wednesday reluctantly recommended Frasers Group PLC's takeover offer to shareholders, after Frasers disclosed a blocking shareholding in MySale on Monday.
Following further share purchases, Frasers is expected to own 504.1 million shares in MySale, representing about 48% of the company's share capital. This, MySale said, "represents effective control" by Frasers.
The board said that it continues to "unanimously believe that the offer undervalues the company and its future prospects", but said Frasers's shareholding will allow it to pass or block resolutions at future general meetings, including the appointment of directors and the disapplication of pre-emption rights.
Pre-emption rights provide shareholders with protection against dilution of their investments.
MySale said that Frasers's shareholding would enable the company to "change the strategy and capital structure of the company on a standalone basis".
MySale also said that the significant reduction in free floating shares following the offer will reduce liquidity in the trading of shares. It said it could be "very difficult" for a shareholder to sell their shareholding in a "reasonable timeframe" without facing a material impact on the price of MySale shares.
In June, Frasers acquired just shy of a 29% stake in MySale. In August, Frasers announced its intention to take full ownership of MySale for 2 pence per share, which valued the company at GBP20.8 million. On September 2, it published its offer document which was subsequently rejected by the directors of MySale on September 16 because they felt the price per share undervalued the company.
Shares in MySale were trading 7.0% lower at 2.00 pence each in London on Wednesday afternoon. Frasers was down 4.3% at 609.00p.
By Chris Dorrell; chrisdorrell@alliancenews.com
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Frasers Group (FRAS)