Cashed-up Kirkcaldie mulls Brierley offer at discount for residual assets

UPDATED: Cashed-up retailer Kirkcaldie & Stains [NZX: KRK] is expected to consider a takeover proposal from veteran corporate raider Sir Ron Brierley at a board meeting next week while noting that the offer price is below its assessment of the residual value of the company.

Sir Ron, who has 9.9% of Kirkcaldie, gave notice of his intention to acquire the remaining shares for $2.75 apiece via his Mercantile NZ Ltd vehicle. The offer would give shareholders the option of taking cash now rather than wait for the final wash-up of the company, which includes negotiating its way out of three leases and possibly selling the shell company for a reverse listing.

This week, Kirkcaldie said its residual value is expected to be $3.18-3.67 a share once it has completed the capital return, which is based on estimated remaining net assets of $6.5 million to $7.5 million. That's above the $5.6 million value Sir Ron's offer would amount to.

The offer can't derail Kirkcaldie's return of about $19.4 million to shareholders via a scheme of arrangement on Monday as payment for cancelling four in every five shares, shrinking total stock outstanding to 2.05 million from 10.25 million shares. That amounts to $2.3602 per cancelled share.

Acting chief executive Orsola Del Sante-Bland said that assuming Sir Ron makes a formal takeover offer, the company would have two weeks to respond with its target company statement. Under the code, Brierley has up to 30 days to make a takeover offer after today's notice, while Kirkcaldie is required to appoint an independent adviser to prepare its response.

Kirkcaldie chairman Falcon Clouston told shareholders at their annual meeting this week that the residual value was dependent on the company's ability to dispose of its remaining leases for sites in Petone, Thorndon Quay and Brandon St, the sale of remaining stock and no warranty claims arising from its agreement with David Jones. There was also a possibility of selling the listed shell company for use as a backdoor listing. A final decision hasn't been made yet on selling the shell or liquidating what's left of the business.

Brierley's Mercantile NZ is currently the fourth-largest shareholder in Kirkcaldie. His offer for the rest of the company is at a premium to the $1.65 he last traded the shares at and above the $2.20 a share he paid to increase his stake in late 2015.

Notice of the takeover came just minutes after Kirkcaldie advised the stock exchange that it had completed the share cancellation exercise.

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

(BusinessDesk)