7:59 cut – BON

Bonmarché (BON) – Response to offer

Bonmarché have recently had a very bad run of trading in their shops, burning through their cash and putting their future existence into material doubt.

BM Holdings, of Sun Capital Partners, the private equity firm that took Bonmarché to market back in 2013 and still held over 50%, recently sold out Spectre (a Philip Day vehicle) at around a 40% discount to the then prevailing share price and a 95% discount to their first day’s closing price back in 2013. This required them to make a takeover offer for the remainder of the company at the highest price paid (in this case, the only price paid).

In today’s statement Bonmarché say that the offer materially undervalues the company and advise shareholders to take no action, as is customary. What is more interesting is that:

• It took 8 working days to produce a holding statement.
• They have been unable to positively engage with Philip Day in the meantime, implying that he has little confidence / interest in their turnaround plans.

This share is now a gambling chip rather than an investment, with many unknowns. But what we do know is that:

• BM Holdings were willing to sell out at 11.445p. They may have been willing to sell for less. We may suspect they were a distressed seller, but importantly they now have no more shares to sell.
• Spectre was willing to buy for 11.445p and may have been willing to pay more. Since they have more to buy this is of more relevance.
• The price cannot fall below 11.445p during the mandatory offer period.

Therefore there is clearly an asymmetric upside from 11.445p, e.g. in the event of a sudden improvement in trading or an increased takeover offer. However for me, the current 15p price already reflects this.

Disclosure

I do not currently own shares in Bonmarché.