Retail gloom forces Bonmarche to give nod to Philip Day’s discounted offer
The fashion retailer had previously rejected the billionaire’s buyout plan
Bengaluru — Trading has been so poor in recent months that women’s fashion chain Bonmarche recommended shareholders accept British billionaire Philip Day’s buyout offer on Wednesday, two months after dismissing it as “inadequate”.
Official data last week showed cold weather in May prompted the biggest drop in retail sales in 2019, with the wet weather in June continuing to hurt many retailers.
Bonmarche, selling budget fashion for the over-50s from more than 300 stores, had previously rejected the offer made in April through Day’s Spectre Holdings, which was pitched at a discount of nearly 29% compared with Bonmarche’s closing price of 16p on Tuesday.
But the retailer said on Wednesday the price is now “fair and reasonable” after trading in the first quarter was “poor”.
“The increase in uncertainty that has developed reflecting the trading and financial position of the business during the first quarter of the financial year makes the certainty represented by the offer potentially more attractive in the short term,” Bonmarche said.
The retailer had warned on sales as early as March as it discounted heavily to clear unsold apparel.
Shares in the company fell as much as 27% on Wednesday, knocking its value down to £5.5m at Wednesday’s low of 11p from a peak of £1.59bn in 2015.
‘Last man standing’
“Bonmarche has simply capitulated without consulting majority shareholders,” said Paul Mumford, a fund manager at Cavendish Asset Management, which has a 10.8% stake in Bonmarche.
“Given that Debenhams, M&S and House of Fraser are disappearing from the high street, Bonmarche was in a good position to be the ‘last man standing’, meaning we could have seen an increase in footfall,” Mumford said.
Bonmarche also said it has been told by its auditor PwC during informal talks that without a clear indication of trading having improved by the end of July, it may have to include a line in the audit report to show it is concerned about the company being able to operate as a going concern.
Founded in 1982, Bonmarche said cost cuts meant it has sufficient liquidity that is supported by its bank facilities.
The company has been struggling recently as consumer spending has dried up and more people shop online. It has been forced to discount and sacrifice profits for sales. Its shares have plummeted 70% so far in 2019.
Through Spectre, Day is Bonmarche’s biggest shareholder with a 52.4% stake. Spectre made the offer to buy Bonmarche’s remaining shares for 11.445p per share after it finalised buying some Bonmarche shares from another of its investors.
Day, who owns high-street retailers such as Peacocks, Jaeger, Jane Norman and Austin Reed, has in the past also made a bid for retailer House of Fraser, which was eventually bought by Sports Direct owner Mike Ashley.