On 21 November 2018, The Reject Shop Limited’s (ASX: TRS) shares uplifted by 14.815 percent after it received an unconditional on-market cash offer from Allensford Pty Ltd for all the ordinary shares of The Reject Shop at a price of $2.70 per share. The offer price of $2.70 is 11 percent higher than The Reject Shop's share close of $2.43 on 20 November, and it represents 19 percent premium to the one-month volume weighted average price of $2.27 a share.
Allensford has appointed its Broker, Bell Potter Securities Limited, to purchase TRS shares at the Offer price. Further, Allensford has also lodged its Bidder's Statement with ASIC, TRS, and ASX which contains detailed information relevant to the Offer, including how to accept.
According to Allensford Pty Ltd, accepting this Offer will deliver certain and immediate cash value to The Reject Shop, and it also removes shareholder exposure to the deteriorating financial performance of TRS and risks associated with continuing to hold TRS shares.
Allensford Pty Ltd has highlighted that TRS’s comparable year on year sales have declined or remained flat in four out of the five most recent financial years. Allensford also informed that the Reject Shop’s Year to date comparable sales performance for the first 15-week period of FY 2019 has fallen to 2.4%, versus positive comparable sales of circa 1% previously assumed by TRS for the first half of the FY 2019. In the month of August, TRS released its revised guidance for H1 2019 net profit after tax of $10m to $11m, which represents a decline in the range of 37.9% to 43.5% from its previous guidance of $17.7m.
Allensford Pty Ltd has also informed that there are potential challenges in the retail sector in which TRS is currently operating, including increased competition for consumer discretionary spend following the emergence of online discount retailers. The Reject Shop is also experiencing high levels of competition in bricks and mortar discount department stores.
In response to the Allensford’s on-market cash offer, The Reject Shop released its Directors statement in which the Board of The Reject Shop has recommended the shareholders to take no action in respect of Allensford takeover offer. Although the offer is looking somewhat opportunistic, the board is intending to further evaluate the offer and Allensford Bidder’s Statement and provide shareholders with a recommendation in due course.
According to TRS’ Chairman Mr. William Stevens, the Board of TRS has confidence in the long-term growth prospects of company’s business which has remained profitable amidst the backdrop of a challenging period in the Australian retail environment. He further added that the management of the company is focused on executing its customer-driven strategy and realizing the benefits from a range of projects.
In the last six months, the share price of the company decreased by 62.96 percent as on 20 November 2018. TRS shares traded at $2.790 with a market capitalization of circa $70.25 million as on 21 November 2018 (AEST 2:41 PM).
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