The Reject Shop Limited

Allensford Bid for the Hostile takeover of The Reject Shop: The Reject Shop Ltd (ASX: TRS) had lately disclosed to the exchange about Bell Potter Securities Limited which is acting as the broker for the on-market takeover offer by Allensford Pty Ltd. This offer is intended for acquiring all of the shares in The Reject Shop Limited. The company has announced that the offer period for the subject purposes has been extended till the closure of trading on the 22 January 2019 unless Allensford Pty Ltd is seeking any further extension.
 
This step to extend the offer has been taken by the brokerage firm in consonance with the ASIC market integrity rules 2017. The Allensford has made the takeover bid followed by a bidder’s statement which was issued earlier on the 21 November 2018. In the second supplementary bidder’s statement, the Allensford management emphasized upon the need to update the shareholders of the Reject Shop via a trading update. This seriousness was being contemplated on account of the following:
 

• The Deterioration of sales at a rapid pace in the FY 2019.
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• The guidance for the FY 2019 which had earlier been released by the company entirely depends upon the management’s assumption of a recovery in the comparable sales trend for the month of December 2018, viewing the Christmas sales.
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• The Allensford’s all-cash offer has provided the needed stability to the share prices of the company.
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• And more importantly, the shareholders of the company would need a trading update urgently to make an informed decision regarding the subscription of the open offer.
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TRS’ Comparable Sales Performance (Source: Company Reports)
 
Moreover, the two recently joined Board members of the company are yet to provide their affirmations towards the company’s stated guidance. Allensford management has said that their offer would bring value to the shareholders of the company considering the challenging retail environment times & a rapid fall in the sales numbers. To this, The Reject Shop’s Board has recommended the shareholders of the company to reject the offer that has been put up by the Allensford and do nothing concerning the offer. The management of the company has contended that:

• The stock of the company has been performing quite well and has been trading continuously above the offer price mentioned in the bid document.
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• Moreover, there were no acceptance to the offer till 20 December 2018, and the Allensford stake remained unchanged at 2.72%.
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• Also, since there is sufficient time left for the offer to end, it is advisable for the shareholders to not take any decisions in haste and consider the prospect of the company before making any decision.
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Also, the management of the company advised to reject the offer in view of the following facts:
 

• The offer to the shareholder is inadequate and does not represent the true value of the company’s stocks.
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• The offer has not adequately priced in the future opportunities for growth and the plans into consideration.
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Meanwhile, the stock has fallen by 51.24% in the past six months as on 8 January 2019 and is trading close to lower level. Based on foregoing, we have a wait and watch view on the stock at the current price of $2.740 as we advise to investors that they should wait for further development on the aforesaid bid.
 

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