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Retail: Mothercare rebuffs takeover approach from Destination Maternity

09:08 02 July 2014

Mothercare has rejected a £266m takeover approach.

Mothercare has rejected a £266m takeover approach.

Baby products retailer Mothercare has rejected takeover approaches worth as much as £266million from a leading North American retail chain.

Destination Maternity, which is the world’s largest designer and retailer of maternity wear with more 1,900 retail sites, has so far failed to persuade the board of Mothercare to engage in talks over its interest.

It disclosed today that it has tabled two approaches to the struggling UK chain, with its latest cash and shares proposal on June 1 valuing Mothercare at 300p a share, equivalent to £266m.

Mothercare, which has 220 UK shops under the Mothercare and Early Learning Centre brands, has been closing stores and developing its internet offer as part of a long-running effort to turn around its fortunes.

It recently recorded UK losses of £21.5m after annual sales fell by 7.5% and the company is without a permanent chief executive after Simon Calver resigned in the wake of a profits warning due to poor Christmas trading.

Destination Maternity said it wants to introduce its brands such as A Pea In The Pod and Motherhood Maternity to Mothercare’s UK stores and international franchise stores.

Its proposals involve combining the two companies under a new UK holding company, which would be listed in the United States.

Chief executive Ed Krell said a tie-up would provide a global platform to expand both Destination Maternity’s maternity wear business and Mothercare’s baby and children’s business.

He added: “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.”

However, Mothercare chairman Alan Parker said: “The board has given these proposals full and thorough consideration.

“We do not believe they reflect the inherent value of Mothercare to our shareholders or its prospects for recovery and growth.

“In addition, we have significant concerns about the deliverability of these proposals. Mothercare has a very strong and valuable international business and significant potential for sustained improvement in the UK.”

Mothercare’s franchised-based international arm is now seen as the growth engine of the business and, with 1,221 stores in 59 countries, accounts for more than 60% of worldwide space and sales. In May, the division’s resilient performance helped the group post a 61% rise in overall underlying profits to £9.5m.

Destination Maternity has 1,906 retail locations, including 578 stores mainly under the names Motherhood Maternity, A Pea in the Pod and Destination Maternity. There are also 1,328 leased department store locations and it sells on the web through Destination Maternity.com.

The Philadelphia-based business was founded in 1982 as Mothers Work, a mail order business, and now generates more than 500m US dollars (£291.1m) in annual sales.

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