Mothercare rejects two bids from US firm Destination Maternity

Destination Maternity, which has over 500 stores in the US and is listed on the Nasdaq, said its latest proposal that it tabled on June 1 “provides a strong basis for discussions between the parties”. However, it said Mothercare has “refused to engage” with the firm.

The proposal is to combine the two mother and baby specialists under a new UK holding company, which would be listed in the US. Mothercare shareholders would receive 300p for each share, comprising 230p in cash and 70p in shares of the new holding company. This would value Mothercare at £266m. Destination Maternity also proposed a ‘mix and match election’ under which Mothercare shareholders could elect to receive more shares or more cash.

Destination Maternity said it was “disappointed” that the Mothercare board has refused to engage in discussions.
In a statement, the US retailer said: “Destination Maternity firmly believes that a transaction, if consummated, would represent a compelling opportunity for Mothercare shareholders to realise a significant premium valuation for their investment and also to have the opportunity to participate in the combined group’s longer term substantial value creation.”

Destination Maternity chief executive Ed Krell said: “We believe there is a compelling strategic rationale for a combination of Destination Maternity and Mothercare, which would create the undisputed global leader in maternity, baby and young children’s apparel and products. 

“Mothercare and Destination Maternity are highly complementary businesses, with strong and trusted brands in their respective markets. Together, a combined company would provide a global platform to expand both Destination Maternity’s maternity apparel business and Mothercare’s baby and children’s business. This is consistent with Destination Maternity’s stated strategic objective to enhance our position as a global leader in maternity apparel, including through international expansion.”

The tie-up would create a 4,300 outlet business with $2.5m of sales. Destination Maternity said it would enable it to introduce its maternity brands to Mothercare’s stores and it would use some of Mothercare’s excess space to establish stand-alone stores in the UK. The US giant said it would also aim to leverage Mothercare’s online expertise.

Meanwhile, Destination Maternity said it would help improve Mothercare’s ability to acquire customers earlier in their pregnancy and its managements operational expertise could help return the UK retailer to profitability.

Destination Maternity must make a firm intention to make an offer for Mothercare by July 30.