Struggling baby products retailer Mothercare has rejected takeover approaches worth as much as £266 million from a leading North American retail chain.
Destination Maternity which is the world’s largest designer and retailer of maternity wear, with more than 1,900 retail sites has so far failed to persuade the board of Mothercare to engage in talks over its interest.
It has tabled two approaches to the struggling UK chain, with its latest cash and shares proposal 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.
The company recently posted a £21.5m loss from its UK operations, and is searching for a new chief executive after Simon Calver resigned in the wake of a profits warning brought about by poor Christmas trading.
Philadelphia-based Destination Maternity generated sales of £291.1m last year. It said it wanted 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 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.”
Mothercare’s franchised-based international arm is seen as the growth engine of the business, with the division’s resilient performance helping the group to post a 61% rise in underlying profits to £9.5m.
Mothercare chairman Alan Parker said the board had given full and thorough consideration to Destination’s approaches but had decided not to engage with its suitor.
“We do not believe they reflect the inherent value of Mothercare to our shareholders or its prospects for recovery and growth,” Mr Parker said.
“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.”
Shares rose 19.5p to 252p.