Kirkcaldie board holds firm on Brierley bid after ditching lease

Earlier this month, Kirkcaldie announced it had sub-leased its Thorndon Quay premises for the remaining year of the term, with a net benefit of $80,000. Photo / Natalie Slade

Kirkcaldie & Stains' directors reiterated their recommendation that shareholders reject veteran corporate raider Sir Ron Brierley's takeover offer after raising their estimate for the cash that will be returned once lease commitments are exited and the company wound up.

Brierley's Mercantile NZ vehicle is the third-largest shareholder in Kirkcaldie, which operated the iconic Wellington department store now being redeveloped as the first New Zealand branch of Australian retailer David Jones. Mercantile NZ offered $2.75 cash a share for the rest of the company, above the $2.20 a share Brierley paid to increase his stake in late 2015.

In April, the board recommended shareholders not sell, and has repeated that recommendation twice since Mercantile increased its offer to $3 per share.

Kirkcaldie stock was trading at $1.559 before Brierley first flagged his takeover offer at $2.75 apiece on February 26. The shares last traded at $3.25. Mercantile owned 6 percent of the company as of May 20.

The Kirkcaldies board today lifted its estimated return to shareholders to a range of $3.50 to $3.60 a share, from a previous range of $2.99 to $3.49, having exited the lease on its Petone premises and sub-leased itsThorndon Quay site.

"In light of these revised numbers we continue to recommend that you do not sell your shares to Mercantile for $3," Kirkcaldie said.

"The board is confident of the company being able to distribute to shareholders between $3.50 and $3.60 per share in a winding up during the course of 2017. We would look to do so as quickly as possible and have a clear strategy for doing so."

The company said it settled a deal to surrender the lease on its Petone premises yesterday at a cost of $450,000. The lease was set to expire on April 30, 2023, and would cost about $1.4 million if left to run to expiry.

Earlier this month, Kirkcaldie announced it had sub-leased its Thorndon Quay premises for the remaining year of the term, with a net benefit of $80,000.

Technically we have a residual exposure to this lease as it is a sub-lease and we rely on the sub-lessee paying us the agreed rental.

"Technically we have a residual exposure to this lease as it is a sub-lease and we rely on the sub-lessee paying us the agreed rental," the directors said. "We have no reason to doubt this will occur."

The third lease, for its Pantry premises, is under a conditional surrender arrangement which was due to be confirmed yesterday, but which the board has now extended until June 8 "largely due to various parties being overseas."

The directors said they have no reason to believe the deal will not proceed, though the company may need to pay for some "minor remedial work" on the space.