Briscoe's offer includes five of its own shares for every nine Kathmandu shares. Photo / Nick Reed
Offer for Kathmandu rejected as undervalued but Briscoe boss says the price is right.
Briscoe Group boss Rod Duke is continuing to talk tough on his firm's plans to acquire Kathmandu, despite his offer being rejected by the outdoor equipment and apparel retailer's board last week.
And in another twist in what could be the biggest takeover play the NZX will see this year, Kathmandu yesterday announced that its long-serving chief operating officer and finance director, Mark Todd, had resigned and will step down at the end of next month.
Todd joined the firm in 1998 and was acting chief executive through much of the 2015 financial year until new chief executive Xavier Simonet took the helm on June 29.
Simonet had been in the role for only one day when, on June 30, Briscoe Group revealed it had bought a 19.99 per cent stake in Kathmandu and would launch a cash and scrip offer for the remaining shares it doesn't own. Briscoe is offering five of its own shares for every nine Kathmandu shares, plus 20c cash for each Kathmandu share, implying a takeover price of $1.80 per Kathmandu share. The stock closed unchanged at $1.74 last night.
Todd said he had decided to resign regardless of the outcome of the takeover. "I had contracted to stay with Kathmandu in my current role until July next year, but now with Xavier on board I feel it is the right time to step aside entirely."
Todd will be replaced as the company's senior finance executive by incumbent chief financial officer Reuben Casey.
Last week, Kathmandu chairman David Kirk said Briscoe's offer was opportunistic and undervalued the firm.
An independent assessment of the offer, conducted by Grant Samuel, valued the shares in a range of $2.10 to $2.40.
Kathmandu shares, which closed as high as $4 in May 2014, have come under pressure in the wake of poor financial results, including the first-half loss of $1.8 million the firm reported in March after a challenging Christmas trading period.
The company indicated last week that it expected to report a full-year profit of $20 million, down from $42.2 million last year.
Kirk also questioned whether Duke, who controls Briscoe with an 80 per cent stake, had the skills to manage a vertically integrated retailer like Kathmandu, which designs and manufactures its own product. Briscoes and Rebel Sport sell brands sourced from suppliers.
Kathmandu shareholders, including Goldman Sachs Asset Management and Kinetic, have indicated that they will reject the bid.
However, Goldman Sachs yesterday indicated that it could change its position, saying it "will continue to be guided by what it considers to be in the best interests of its clients and reserves all of its rights to change its position in respect of the offer, whether on its current terms or otherwise".
Duke told the Business Herald yesterday that the outdoor retailer was doing a "pretty good" job on the design and manufacturing front, but was failing in the final stage - selling the product.
"The real issue they've got, and they've had it for a considerable period of time, is that they simply do not know how to manage merchandise through stores and online," he said. "They just can't do it and this is the big issue."
Duke said Kathmandu's forecast for a $30.2 million profit in the 2016 financial year was very optimistic.
"We think our offer that's on the table is pretty strong and should do the job."
No one from Kathmandu was available for comment yesterday.
What's next? •The offer is open for acceptance until September 17, unless extended. •Briscoe may have to increase its offer in order to get it over the line. •If successful, the takeover will give Briscoe a presence in Australia and create a transtasman retailer with annual revenue of more than $900 million and an $847 million market capitalisation. •Kathmandu will report its full-year result on September 29.