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May 22, 2019

Bonmarché pushes on as sceptical bidder “takes step back”

Bonmarché is pressing on with plans to improve the performance of the business and has urged investors not to take any action on a takeover bid that remains on the table for the UK value women's wear retailer.

By Hannah Abdulla

Bonmarché is pressing on with plans to improve the performance of the business and has urged investors not to take any action on a takeover bid that remains on the table for the UK value women’s wear retailer.

Spectre, which is the Dubai-based investment firm led by the owner of Edinburgh Woolen Mill, Philip Day, tabled the GBP5.7m bid at the beginning of April. It had bought a 52.4% stake in the retailer, triggering a mandatory takeover bid – and said it was “well positioned to provide advice, guidance and support to secure the long term future of the Bonmarché business, its stores and employees” and that its owner has a “successful track record within the retail sector, especially in turnaround and distressed situations.”

Earlier this month, Bonmarche advised its shareholders reject the offer on the basis it “undervalues Bonmarché and its prospects”. It referred them to a prior announcement where it said it was reviewing a number of cost reduction actions which have begun to be implemented.

“It is the expectation of the Bonmarché directors that the delivery of this cost reduction programme should result in the improved operational and financial performance of the business. Accordingly, the Bonmarché directors consider that, whilst being both immediate and certain, the cash value of the offer is unattractive when compared to the shareholder value that the Bonmarché directors aim to create in the medium term.”

Last week, Spectre acknowledged Bonmarche’s letter to shareholders and advised it would step back and see if what Bonmarche had planned for the business would work, but said it did “not believe these plans will deliver value for Bonmarché shareholders in the medium term.”

The bidder said it would keep the offer open to shareholders. Addressing the detail of Bonmarche’s strategy, Spectre said the plan to reduce the cost base to a sustainable level whilst minimising the impact on operational performance would not be “sufficient enough” to return it to profitability. It added it would not support proposals for taking on additional bank debt nor dividend payments in order to rebuild cash reserves back to historical levels.

“Spectre looks forward to the Bonmarché board keeping Bonmarché shareholders updated on delivering their strategy for improved operational and financial performance for Bonmarché. Spectre believes the Bonmarché board now needs to demonstrate what they are doing is working and they are delivering on their plans. Spectre will continue to monitor the progress being made and the overall performance of Bonmarché.”

Bonmarche subsequently responded, adding it continued to work on the planned programme, that it looked forward to working with Spectre on the future plans for the business as well as having the opportunity to discuss with Spectre its existing plans for the business, including the cost reduction programme. It continued to urge investors not to accept the offer and added it had reached out to Day to meet and discuss future plans of the business as “his input would be valued”, but Day had not yet responded.

Bonmarché has released several negative trading updates recently, with shares tumbling in March following a profit warning on the back of weaker trading. The retailer forecast underlying profit before tax loss for the year of between GBP5m and GBP6m (US$6.64bn-$7.97bn), compared to a range of breakeven to a loss of GBP4m forecast in December. 

The retailer expects to release its results for the 52 week period ended 30 March 2019 on 26 July.

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