Philip Day in surprise swoop on struggling Bonmarché, says he can secure its future
While endless wars of words, rumours, and bids-plus-counter-bids seem to grab the headlines day after day as far as the ownership of certain fashion retailers are concerned, Bonmarché Holdings surprised the market on Tuesday with news that it’s now controlled by retail entrepreneur Philip Day. End of story.
Well, it’s not quite the end as Day has acquired just over 52% of the company and is now launching an offer to buy the shares he still doesn’t control, but it’s a good example of how Day likes to operate largely out of the public eye. And it perhaps explains his decision not to bid for LK Bennett as he clearly has one big challenge on his hands with his new purchase.
The billionaire owner of Edinburgh Woollen Mill has specialised in buying distressed brands (he also owns Peacocks, Jaeger, Jane Norman and Austin Reed), and distressed Bonmarché certainly is.
Although the chain operates over 300 shops and specialises in the 50+ budget market that has been seen as relatively resilient in a retail world that's rapidly moving online, it has struggled for some time. It expects to lose up to £6 million pounds this year. So it's perhaps no surprise that the acquisition values it at less than £6 million.
Whether it’s Philip Day, Mike Ashley or anyone else, buying struggling brands is undeniably risky in the current environment, but Day said that he’s "well positioned to secure the [chain's] long term future”.
And Bonmarché is clearly complementary to one existing business that Day owns, the Peacocks chain. He bought Bonmarché via his Dubai-based investment vehicle Spectre with that company saying that Day, “has a successful track record within the retail sector, especially in turnaround and distressed situations.”
Looking at the details of the deal, he has unconditionally acquired 26.2 million shares of the company at 11.445p each. That's way below their value of 316.5p each recorded in October 2015, shortly before the share price fell off a cliff. They were trading at 38p each as recently as March 15 and the shares began the latest decline after the company issued another profit warning on March 19.
Day is now launching a full bid for the rest of the shares, which is a requirement under Rule 9 of the Takeover Code.
But given that he already controls the company through his 52% holding, what happens now? Well, assuming he manages to buy enough of the remaining shares, he plans to take the company private.
And he intends “to ensure the long-term future of the Bonmarché business as a retailer of women's clothing and accessories through a portfolio of profitable stores and concessions across the UK and via other channels (including its website).”
In a statement issued through Spectre, he added that he will undertake “a detailed review with the involvement of Bonmarché's existing management of all material aspects of the business and its operations,” including, pricing and discount strategy, brand and marketing strategy, stores viability, HQ functions, supplier terms, supply chain and logistics, and management and board composition.
And “in light of the recent trading performance and the loss-making position of Bonmarché, Spectre's current intention is to reduce the cost base to a sustainable level whilst minimising the impact on operational performance.”
Maureen Hinton, Global Retail Research Director at GlobalData, hailed the deal. “This is an excellent result for Bonmarché, which is struggling following profit warnings and a challenging market," she said. "It rejoins its former sister company Jane Norman which Day saved several years ago and continues to trade. Being taken out of constant City reporting and scrutiny will allow the retailer to take a long term view of the business and benefit from the shared assets of the group. It must be a relief for management, though the offer for shareholders at 11.445p per share is way below the c120p of last summer is not such a relief. But a recovery in the share price was going to be very challenging."
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