Kathmandu offer reflects value of shares

  • 07/08/2015

By Jonathan Underhill

Briscoe Group managing director Rod Duke says after studying Kathmandu Holdings' response to his takeover offer he has concluded the price "fully reflects the value of Kathmandu shares".

Kathmandu shares have risen 1.1 percent to $1.77 today, below the $1.80 implied value of Briscoe's offer and lower than the $2.10 to $2.41 range given in the target company statement.

The stock closed at $1.39 on the day before he emerged with 19.9 percent of the company. It had sunk as low as $1.25 from as high as $4.05 last year after an unexpected first-half loss.

"Our offer remains on the table and is open for acceptance until September 17, unless extended in accordance with the Takovers Code," Mr Duke said.

"We believe that Kathmandu is a great brand and has good products, but by its own admission is failing to execute basic retailing fundamentals.

"Nothing in Kathmandu's target company statement provides confidence that management is able to deliver a turnaround and achieve its lofty earnings forecasts."

Kathmandu chairman David Kirk said yesterday the takeover offer was rejected "overwhelmingly" because it under-valued the outdoor clothing and equipment chain.

Kathmandu forecast improved profitability for 2016 but Mr Duke reiterated today that it may struggle to reach its targets, calling them "highly optimistic".

"As Kathmandu's largest shareholder its latest performance gives us little confidence in its 2016 full year forecasts, which in our view are based on ambitious assumptions that come with enormous execution risks," he said.

He said Kathmandu's response "has been typical of these processes", where the target company has been struggling but says it is worth more.

"Ugly sisters turn into beautiful princesses when someone looks at them sideways," he said of Kathmandu's response to his offer.

Briscoe, which is controlled by Mr Duke, is offering Kathmandu shareholders a mixture of cash and scrip in the enlarged company, at a rate of five Briscoe shares for every nine Kathmandu shares as well as 20 cents.

Some institutions say the offer doesn't include enough cash and leaves Mr Duke in control with an estimated 55 percent of the enlarged company.

Briscoe shares last traded at $2.96 and have declined 0.3 percent this year.