Melbourne’s billionaire Geminder family has lobbed a $78 million on market cash takeover bid for the struggling discount chain, The Reject Shop.
The offer of $2.70 a share is a 19% premium to the stock’s one-month average price of $2.27.
The Reject Shop Board said in a statement it considers the offer “to be somewhat opportunistic”. But it will evaluate the offer and the Bidder’s Statement received, and provide shareholders with a recommendation in due course.
TRS’ Chairman William Stevens said that “The Reject Shop Board continues to believe in the long-term growth prospects of our business which has remained profitable amidst the backdrop of a challenging period in the Australian retail environment.
“We remain focused on executing on our customer-driven strategy, and realising the benefits from a range of projects we have implemented which leverage the infrastructure, brand, and assets of The Reject Shop.”
Broker Bell Potter will be standing in the market buying shares at the offer price.
The bid was lodged by the family investment vehicle of Raphael Geminder, who founded and owns 38% of the $1.2 billion packaging giant Pact Group which has seen its shares plunge this year after a series of earnings downgrades and management changes.
Pact shares have lost around 50% year to date, including another 4% plus in yesterday’s weak market.
Pact though is in good company – The Reject Shop’s shares have fallen 54% over the past year, from $5.26 to $2.43. They jumped 14% to $2.77 yesterday
The unconditional offer follows the shock earnings downgrade last month from the retailer which cut its forecast from about $18 million to between $10 million and $11 million for the December half.
“There is increased competition for consumer discretionary spend following the emergence of a number of online discount retailers and continued high levels of competition in bricks and mortar discount department stores,” the bidder’s statement said.
“Unless managed appropriately, these factors are of particular concern for retailers such as TRS which have a significant fixed cost base (due to the large leased store network and associated costs) meaning the impact of a slowdown in sales is amplified.”
Accepting the cash offer would give Reject Shop shareholders immediate value while removing the risk of earnings decline, the statement said.
The Reject Shop has 351 stores across Australia and reported total sales of $800 million in 2017-18 and a net profit of $16.6 million.
