May 17, 2019
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Bonmarché takeover: Philip Day to watch and wait, doubts turnaround will work

May 17, 2019

It looks like the full takeover of value retailer Bonmarché by a holding company that billionaire retail entrepreneur Philip Day controls isn't going to happen… well, not for now at least.


Just to keep you updated, early last month Day-controlled Spectre Holdings acquired a stake of more than 50% in the retailer and launched a mandatory full buyout offer. But the offer valued the company at less than £6 million and the board rejected it as being too low.

Spectre had said at the time it made the offer, that its 11.445p per share price was final, and late on Thursday it became clear that boardroom opposition hasn't encouraged it to raise the price, even though it has received acceptances adding up to less than 1% of the shares.

So what happens now? Spectre is taking a wait and see approach, keeping its offer open, and sitting back while current management continues to attempt a turnaround at the company.

In a stock exchange statement it said: “Spectre will keep its offer to Bonmarché shareholders open until further notice, allowing any shareholder to accept the offer if they decide to. Spectre will now take a step back and see if the Bonmarché board can deliver on the plans and strategy it has set out.”

But it added that “at this point in time, Spectre does not believe these plans will deliver value for Bonmarché shareholders in the medium term.”

In particular Spectre, said that it doesn't believe management’s cost saving plan will be enough to return Bonmarché to profitability, and Day has also put shareholders on notice that he’s “unwilling to support proposals for any dividend payments for the foreseeable future in order to rebuild the cash reserves of the Bonmarché business back to historical levels and to ensure it is not reliant on bank debt.”

And he doesn't feel that it’s “appropriate for Bonmarché to take on additional bank debt in light of its recent trading performance and continuing challenging market conditions.”

It all means that it’s a difficult position for the company to be in. The person who controls more than half of its shares is effectively telling the board to get on with attempting its turnaround but that he won't support the company borrowing to boost its cash flow or to invest in the business. And he’s telling shareholders that he won’t support them earning any dividends until the matter is resolved.

Bonmarché’s shares have been falling for several years having been at 316.5p each in October 2015 but plunging to 38p by early March this year. After a profit warning that month they fell again, although the closing price on Thursday was just over 15p, which means that share buyers still seem to think the 11.445p offer could be increased or even withdrawn.

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