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Kirkcaldie directors recommend shareholders reject Brierley takeover offer

Friday 1st April 2016

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Kirkcaldie & Stains' directors have recommended shareholders reject veteran corporate raider Ron Brierley's takeover offer, saying Brierley has offered too little for the shares.

Brierley's Mercantile NZ vehicle is the third-largest shareholder in Kirkcaldie, the operator of the iconic Wellington department store that is now closed for redevelopment as the first New Zealand branch of Australian retailer David Jones. Mercantile NZ had a 6 percent stake as of March 24 and has offered $2.75 cash a share for the rest of the company, a premium on the original $1.65 price at which the shares then traded, and above the $2.20 a share Brierley paid to increase his stake in late 2015. The shares recently traded at $3.10 and have nearly doubled in value this year. 

"We believe that shareholders (in the absence of the special circumstances of any particular shareholder) will receive greater value by waiting for a distribution of the assets of the company as a consequence of it being wound up," the directors said. 

Kirkcaldies' board calculated a high and low scenario for the company's wind up, with the high scenario paying $3.49 per share and the low scenario paying $2.99 per share, both higher than Mercantile's offer.

The directors said the main factor to determine whether the high or low scenario eventuates is whether the company's $450,000 payment to be released from the lease on its Petone premises becomes unconditional. The release was announced earlier this week and depends on the landlord's unconditional agreement to sell the premises. The landlord's decision is due today while the lease decision is due on Monday. 

The Petone lease expires on April 30, 2023, and would cost about $1.4 million if left to run to expiry.

"If it is confirmed, we are confident of achieving the high scenario," the directors said. "We hope to be able to advise you of this within the coming week, and an announcement will be made to NZX just as soon as the position becomes clear. While the Mercantile offer provides a known fixed sum, and while there are some other uncertainties associated with both the high and low scenarios, and there will be some delay in moving to a winding up and making a distribution, we do not believe those uncertainties or the delay are such that the Mercantile offer can be considered attractive."

The board appointed Northington Partners as an independent adviser. Northington also concluded the offer was not fully priced and made a high assessment of $3.44 per share and a low assessment of $3.26. 

"The board has reservations about the low assessment, but can see that if the current Petone lease deal does not proceed, but an alternative transaction occurs (albeit at a later date), then a figure above the board’s low scenario will eventuate," the directors said.

Brierley's offer will close on May 13, and is conditional on Kirkcaldie making no dividend, bonus or other payments or distributions and on Mercantile gaining acceptances for more than 50 percent of the stock.

(BusinessDesk)

BusinessDesk.co.nz



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