Member Article

Mothercare shares up 10% after second takeover bid

Mothercare shares jumped by more than 10% last night after the firm rejected two takeover proposals from a US rival.

The baby product retailer, which has seven stores in the North East and 1,200 worldwide, confirmed it had spurned an increased offer proposal from US firm Destination Maternity of 300p a share.

The renewed bid, on the back of a failed attempt on June 3, valued Mothercare at £266m and comprised 230p in cash, and shares valued at 70p in a new holding company that would be listed on the New York Stock Exchange or Nasdaq but incorporated in the UK.

Destination Maternity’s latest offer was a 29% premium on Mothercare’s closing price of 232.5p on Tuesday night.

But news of the latest offer saw its shares jump by 10% to 252p last night.

Mothercare – which has stores in Newcastle, Sunderland, North Shields, Darlington, Stockton, York and the Metro Centre in Gateshead – has been hit hard by cut-price competition from supermarket groups and online retailers in its main UK market.

It issued a profit warning in January and, prior to Wednesday, its shares were down 41% so far this year.

It has been trying to fight back by revamping UK stores, closing weaker ones and expanding online and abroad.

It had aimed to make a profit on its loss-making British operations by 2015, but said in January that 2016 to 2017 was now more realistic.

Mothercare said it rejected Destination Maternity’s proposal on June 3, saying it “significantly undervalued Mothercare and its attractive prospects,” and had “significant transaction execution risks,” given the proposed transaction structure.

Destination Maternity said it will continue its pursuit, with the firm’s CEO Ed Krell saying: “We are seeking to engage with the board of Mothercare on a constructive basis with the goal of completing a recommended transaction.”

The new structure would allow Destination Maternity to benefit from Britain’s lower company tax rate compared with the United States.

Britain’s corporate tax rate has already attracted other US predators for so-called “tax inversion” deals, including drug company Pfizer, which failed in an attempt to takeover rival AstraZeneca.

Under Britain’s takeover rules Destination Maternity has been given until July 30 to announce a firm intention to make an offer for Mothercare, or walk away.

This was posted in Bdaily's Members' News section by Martin Walker .