STOCKHOLM (Reuters) - Investment firm Mellby Gard, the biggest shareholder in Swedish fashion group KappAhl KAHL.ST, on Monday made an offer to buy the rest of the retailer whose profits are under pressure from tough competition in a rapidly changing market.
The 20 crown per share cash offer values KappAhl at 1.54 billion crowns ($162 million) and represents a 43% premium to the shares’ closing price on July 26.
KappAhl operates its core KappAhl fashion chain and Newbie childrenswear stores and an online business. It currently has 356 KappAhl stores in Sweden, Norway, Finland and Poland, and 27 Newbie stores in Sweden, Norway, Finland, Poland and Britain.
But the company has struggled to keep up with rivals, such as H&M (HMb.ST), and also with fashion retailing’s online shift. Demand has slowed at KappAhl’s main business - womenswear.
In June, KappAhl reported a fall in operating profit to 6 million crowns in the March-May quarter from 121 million a year ago.
Mellby Gard, the investment vehicle of Swedish business magnate Rune Andersson, currently owns 29.6% of KappAhl. It said synergies with its other holdings could strengthen KappAhl’s competitiveness in a challenging market.
Mellby Gard CEO Johan Andersson told Reuters that as sole owner of KappAhl, it would be able to seek synergies primarily with Mellby Gard’s wholly-owned fashion retailers Flash and Dea Axelsson, mainly within purchasing, rent negotiations and logistics.
“The bigger you are in this business, the better,” he said in an interview.
KappAhl is in the middle of a programme to save 100 million crowns through staff cuts, store closures and store rent renegotiations. Elisabeth Peregi, CEO since April, said in June she was preparing further measures.
“It’s a tough sector in the near term. But long-term, we believe in KappAhl and the new management and we see many bright spots such as the children’s clothes,” Andersson said. “We are not coming in with an entirely new agenda.”
KappAhl’s shares were up 39.6% at 1006 GMT, just below the bid price. At Friday’s close, they had lost a fifth of their value since the turn of the year, and about 90% since all-time-highs in 2010.
KappAhl said in a separate statement an independent bid committee that does not include chairman Andres Bulow and board member Thomas Gustafson, who are both also on Mellby Gard’s board, would now evaluate the bid.
Reporting by Helena Soderpalm; Editing by Kirsten Donovan and Jane Merriman