Mothercare rejects £266m takeover bid from American firm

Wednesday 02 July 2014 11.22
Destination Maternity has tabled two approaches for the UK firm
Destination Maternity has tabled two approaches for the UK firm

US mother and baby product retailer Destination Maternity has not abandoned its pursuit of struggling Mothercare after revealing today it had two bid proposals rejected.
              
Shares in Mothercare were up 11% this morning after Destination Maternity said Mothercare's board had spurned an increased offer proposal of 300 pence a share that valued the company at £266m. 

That proposal on June 1 implied a premium of 29% to Mothercare's closing share price in London yesterday of 232.5 pence. 

"We are seeking to engage with the board of Mothercare on a constructive basis with the goal of completing a recommended transaction," said Destination Maternity's chief executive Ed Krell. 

He said there was a "compelling strategic rationale" for a combination of the two companies. 

Mothercare declined to comment. 

Mothercare, hit hard by cut-price competition from supermarket groups and online retailers in its main UK market, issued a profit warning in January and prior to today its shares were down 41% so far this year.

The company, which has over 1,200 stores worldwide, has been trying to fight back by revamping UK stores, closing weaker ones and expanding online and abroad. 

It had aimed to make a profit on its loss-making British operations by 2015, but said in January that 2016 to 2017 was now more realistic. 

Nasdaq-listed Destination Maternity, which trades from over 1,900 retail locations, has a market value of £316m and its shares have fallen 23% so far this year.   

Its store brands include Motherhood Maternity, A Pea in the Pod and Destination Maternity. There are also 1,328 leased department store locations and it sells on the web through Destination Maternity.com. 

The Philadelphia business was founded in 1982 as Mothers Work, a mail order business, and now generates more than $500m in annual sales. 

Mothercare opened its first store in 1961 in Surrey in the UK. Its franchised-based international arm is now seen as the growth engine of the business and with 1,221 stores in 59 countries accounts for more than 60% of worldwide space and sales.

 In May, the division's resilient performance helped the group post a 61% rise in underlying profits to £9.5m.