Kathmandu shares soared to a four-month high after Briscoe Group acquired a 19.9 percent stake and said it plans to make a full takeover, raising the prospect that managing director Rod Duke could use his skills to revive the struggling outdoor equipment and clothing chain.
Kathmandu stock rose as much as 29 percent to $1.80, the price Briscoe paid institutions for most of the holding, and recently traded at $1.74. Briscoe built its stake without contacting the target company and Kathmandu said it wouldn’t comment on the imminent cash and scrip offer.
Duke owns about 80 percent of Briscoe and under his leadership the retailer’s shares have climbed 130 percent in the past five years as he drove sales growth at his homeware and sports goods stores. Kathmandu stock has slipped about 15 percent in the same period and has dropped 45 percent in the past 12 months. In February, Kathmandu said Christmas and January trading had lagged behind expectations, driving the retailer to a first-half loss. A month earlier, the company appointed Xavier Simonet to replace Peter Halkett, who left in November after eight years running the company.
“Duke has proved he can do an exceptional job,” said Matthew Goodson, managing director at Salt Funds Management. “Kathmandu clearly has some challenges and it will be very interesting to see if his expertise in a slightly different but similar part of retailing can be successfully translated across. A lot of people would back him.”
Kathmandu posted a $1.8 million loss in its first half, compared to a profit of $11.4 million a year earlier. Its gross margin shrank to 59.3 percent from 63.9 percent, with the most marked deterioration in Australia. Sales rose as the company aggressively discounted stock and acting CEO Mark Todd said in March that the company, which has 157 outlets, was slowing its pace of new store openings and that its full-year performance was dependent on favourable Easter and Winter sales.
Auckland-based Briscoe quietly built a 4.99 percent stake of Kathmandu before buying 14.9 percent of the retailer from institutional investors for $1.80 a share. That amounts to about a 29 percent premium to Kathmandu’s closing price yesterday.
Some 31 million shares changed hands today, the biggest one-day volume since former owners Goldman Sachs JBWere and Quadrant Private Equity took the company public in 2009, selling their entire interest. The Kathmandu brand was originally built up by founder Jan Cameron.
“I am excited by the potential that would arise from bringing together these two iconic retailers – we each have strong and recognisable brands that I see as complementary,” Duke said in a statement. The full takeover offer would consist of cash and shares.
Briscoe said it wouldn’t comment further on its plans. The operator of the Briscoe homeware stores and Rebel Sports outlets was the subject of market speculation in January that it was looking at a bid for struggling childswear retailer Pumpkin Patch.
As at Jan. 25, Briscoe had $89.7 million of cash and bank balances available.
Briscoe shares rose 1.8 percent to $2..90 today.