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Mothercare rejects US takeover

Article By: ,  Financial Analyst
July 2, 2014 10:45 AM

Mothercare has resisted the advances of a major US competitor which is looking to purchase the company.

Destination Maternity has made two takeover proposals for Mothercare valuing the British company at £266 million but these have been rejected. The US firm stated that its latest offer was 300p per Mothercare share, representing a 29 per cent premium on the closing price of 232.5p on July 1st.

Mothercare has experienced a somewhat turbulent time of late with the company issuing a profit warning in January following poor Christmas sales. Just a month later, chief executive Simon Calver announced his resignation from the retailer and was replaced by former Shop Direct and Next Directory executive Mark Newton-Jones.

It has faced increased competition in recent times and a recent report by the Times of London noted that it could potentially cut up to 500 customer service adviser roles as part of its restructuring plans. The retailer wants to cut the number of hours of staff who work 24 hours or more every week and those that do not agree to the changes could potentially be made redundant.

Despite the recent poor performance, the company stated in 2013 that it expected to turn around its loss-making UK operation by 2015 but this has been amended to 2017. Destination Maternity stated that it would not rule out entering a revised bid for Mothercare.

Ed Krell, chief executive of Destination Maternity, said: "We have long been familiar with Mothercare and hold the company's UK heritage and successful track record of international expansion in the very highest regard.

"We believe the combination would create a highly attractive opportunity to accelerate the growth and development of both businesses and generate substantial value for our respective shareholders."

Following news of a potential takeover, Mothercare's share price jumped 15.16 per cent to 267.75p as of 08:49 BST on July 2nd.

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