25th Jul 2014 17:31
LONDON (Alliance News) - US-based maternity apparel retailer Destination Maternity Corp Friday said it is withdrawing its proposal to merge with UK-based mother and baby products retailer Mothercare PLC.
Earlier this month, Destination Maternity increased its offer to GBP266 million or USD453 million after two non-binding written proposals were rejected by Mothercare's board. Under the offer, Mothercare shareholders would have received 300 pence for each Mothercare share, compared with 250 -275 pence it initially proposed.
Destination Maternity Friday said its financial adviser canvassed the views of shareholders who hold a substantial proportion of Mothercare shares.
"While Destination Maternity believes that its proposal was compelling, it is clear that the shareholders of Mothercare believe that only a very significant increase in the value of such proposal would be acceptable," Destination Maternity said.
The company said it light of this and considering it has not been permitted by Mothercare's board to conduct due diligence, it is unwilling to increase the value of its proposal and has therefore decided to withdraw its proposal.
It said the Mothercare Board and certain Mothercare shareholders presented concerns to Destination Maternity's financial adviser regarding Destination Maternity's ability to finance the combination with Mothercare.
Destination Maternity Chief Executive Ed Krell the company was "disappointed" that Mothercare's shareholders did not support its proposal and were unwilling to allow due diligence to be carried out.
"We believe that there was a strong strategic rationale for the combination of these highly complementary businesses, which would have enhanced the product range of both companies, spanning the pregnancy to toddler life-cycle," Krell said.
"We further believe the combination would have created a global leader in maternity, baby and children's apparel and products capable of accelerating the growth and long-term development of both businesses across channels and in markets around the world," he added.
At the time of its original proposal Destination Maternity said a transaction, if consummated, would help Mothercare shareholders to realise a significant premium valuation for their investment, and would have the opportunity to participate in the combined group's longer term substantial value creation. The new company was expected to have about USD1.7 billion in sales and about USD2.5 billion in global network retail sales, operating through over 4,300 outlets.
Mothercare shares closed up 0.2% at 258.25 pence Friday.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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