The Reject Shop has just received a $78m takeover bid
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Iconic Australian discount retailer The Reject Shop has just received a takeover from a global investment group with ties to late Visy chairman Richard Pratt, as the business continues to struggle in challenging market conditions.
The Reject Shop (ASX:TRS), worth $70.3 million, today told its shareholders to take no action on an offer from a group called Allensford, which is pitching $2.70 per The Reject Shop share — at least for the time being.
The deal is worth $78.1m in total and is a thin 19pc premium to The Reject Shop’s share price average over the past month.
Allensford was incorporated specifically to buy Reject Shop shares.
In its bidder’s statement to the ASX this morning, it told Reject Shop shareholders to accept the offer because of the risk of further deterioration in retail trading conditions.
The fund is wholly owned by Bennamon, which itself is wholly owned by Kin Group, which is a global investment company and family office of Melbourne packaging billionaire Raphael Geminder and his wife Fiona — one of Mr Pratt’s two daughters.
Reject Shop chairman William Stevens said the offer was “somewhat opportunistic” but that he and the board would take time to consider it.
“The Reject Shop board continues to believe in the long term growth prospects of the business which has remained profitable amidst the backdrop of a challenging period in the Australian retail environment,” he said.
“The board recommends shareholders take no action in respect of the takeover offer,” the statement read. “Although the board considers the offer to be somewhat opportunistic, it will evaluate the offer and provide shareholders with a recommendation in due course.”
Allensford has appointed its broker Bell Potter to purchase TRS shares at $2.70 a piece from today until January 7, when the offer the closes.
They were up 14 per cent to $2.76 this morning as that process began.
Allensford director Nicholas Perkins outlined a series of reasons why shareholders should sell their shares.
“With TRS approaching the critical Christmas trading period, decelerating comparable sales mean there is a significant risk that The Reject Shop’s financial performance deteriorates further,” he said.
“Unless managed appropriately, these factors are of particular concern for retailers such as The Reject Shop which have a significant fixed cost base, due to the large leased store network and associated costs, meaning the impact of a slowdown in sales is amplified.”
It has been a tough period for The Reject Shop, which was founded in 1981. Its shares were hammered 44 per cent last month when it issued a profit warning, with managing director Ross Sudano doing his best to reassure investors.
“We understand and acknowledge this is extremely disappointing news for our shareholders,” he said. “We are doing everything within our power to manage the business for profitable growth through this extremely challenging consumer environment.”
Australian retail has been hit hard this year, with several iconic outlets being forced to fold.