Jun 26, 2019
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Bonmarché U-turn on Philip Day offer as trading gets tougher

Jun 26, 2019

It seems that value fashion retailer Bonmarché’s attempts to rebuff a full takeover by its majority shareholder Philip Day have failed, with the company on Wednesday announcing continued weak trading and a change in its previous view that the offer price isn't enough. It has staged a dramatic U-turn and is now recommending the offer, even though it continues to think it's too cheap given its long-term prospects.


Day already owns rival Peacocks while his Spectre Holdings vehicle owns more than 50% of Bonmarché. In mid-May it made a mandatory unconditional cash offer of 11.445p per share to take full control. That price attracted very few shareholders and with the company itself saying it undervalued the business, there’s been a standoff since then.

But it looks like time is running out for Bonmarché as times are tough out there. Along with its change of mind, on Wednesday it issued a trading update and said that Q1 trading “has been poor, primarily due to continued weakness in the underlying clothing market, and a lack of seasonal weather to counteract it, particularly in June.”

In previous years, Bonmarché explained, “there would have been an expectation that at some stage during the selling season, better weather would generate a sales peak to offset the dip experienced during the first quarter.” But the company added that “in our experience, the current clothing market is not following the patterns of previous years. It is early in the financial year, and the achievement of a PBT [profit before tax] result which is in line with the board's expectations is possible, but there is a significant degree of uncertainty attached to this, and risks are more heavily weighted towards the downside.” In short, sales are struggling and profits will be hurt.

The company said its cost reduction program has cut its expenditure so it has enough cash to continue. But in a seeming contradiction of this statement, added that its auditor PwC “has suggested during informal discussions” that without “a clear indication of an improvement in trading” before July 26 when the accounts are due to be signed off, it’s likely to include a reference to the “uncertainty with regard to going concern” in the accounts.

Hence the change of mind on the Spectre offer. That offer remains open for acceptance until further notice and while “the board's view remains that [it] does not adequately reflect the potential longer term value of the business, the increase in uncertainty that has developed makes the certainty represented by the offer potentially more attractive in the short term.”

It now says that “the terms are fair and reasonable” and added that “the board believes that once the near term has been weathered, the medium and long-term prospects for the Bonmarché business are good.”

But management also continued to express frustration at their lack of contact with Philip Day. Wednesday's statement also said: “The board continues to welcome the opportunity to engage with Mr Day, who has, as yet, not taken up the offer to discuss future plans for the business, and believes that, with his sector experience, he would be a successful long-term owner.”

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