Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.
What: Baby products retailer Mothercare (LSE: MTC) has rejected two takeover approaches from Destination Maternity, the US company revealed today. The 300p per share proposal in cash and shares valued Mothercare at £266m. Shares of Mothercare jumped 11% to 259p in early trade.
So what: Destination Maternity, which is the world’s largest retailer of maternity apparel, has not ruled out a revised bid. The firm stated its proposal at the beginning of June “provides a strong basis for discussions between the parties”.
The deal would see Destination Maternity form a holding company in Britain for tax purposes and the shares would be listed in the US. So far Mothercare, which issued a profit warning in January, has refused to engage in discussions.
Mothercare said it rejected the bid due to the “insufficient value attributed to [our] significant prospects”. The board claims its strategy as an independent company “would create significant value for shareholders”.
Now what: To comply with the Takeover Code, Destination Maternity must announce whether it intends to make a firm offer for Mothercare by 30 July.
Mothercare is down 33% year-to-date and after this morning’s price movement the shares trade at 23 times forecast earnings. Mothercare does not expect to make a profit on its British operations until 2016 at the earliest.
