Kathmandu rejects Briscoe takeover

UPDATEDKathmandu "shot itself in the foot": Kirk

Outdoor equipment retailer Kathmandu [NZX: KMD] has rejected a takeover offer from Briscoe Group [NZX: BGR], saying it is opportunistic, exploitative and too low.

Kathmandu directors unanimously recommended shareholders reject the offer.

Briscoe, owners of New Zealand retail chains Briscoes Homeware and Rebel Sport, is offering five shares for every nine Kathmandu shares and $0.20 cents for each Kathmandu share.

The offer values Kathmandu at about $1.80 a share.

An independent report from Grant Samuel, published today, estimates the value of Kathmandu shares is $2.10 to $2.41.

Kathmandu chairman David Kirk described the offer as manifestly inadequate.

"The board believes the offer is intended to create value for Briscoe shareholders at the expense of Kathmandu shareholders. It comes opportunistically off the back of an isolated period of internal and external challenges experienced by Kathmandu in the period leading up to and including Q3 FY2015. I am confident that management can deliver strong results that will, over time, result in superior value for Kathmandu shareholders”.

Briscoe could afford to pay the high end of Grant Samuel’s valuation and still make money, said Kathmandu, with a price of $2.41 producing an 11% accretion in earnings per share for the buyer.

Alongside its response to the takeover, Kathmandu released unaudited results for the year to July 31 showing a net profit of $20 million, well down on the previous year’s $42.2m.

The company said the performance was affected by “an isolated period of challenging trading conditions” and it is forecasting a significant improvement in the coming year.

Management are forecasting a 43% rise in earnings before interest and tax for 2016 to $48.2m, with sales rising 11% to $454.6m. 

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