Destination Maternity has revealed it does not intend to make an offer for the UK mother and baby retailer Mothercare.
Destination Maternity revealed that it was interested in combining its business with Mothercare’s on July 2 and had submitted two non-binding proposals to the retailer, that had been rejected by its board. It originally offered 250p to 275p per share in late May but upped it to 300p in early June.
However, Mothercare shareholders believed that “only a very significant increase in the value” would be acceptable according to Destination Maternity.
Destination Maternity said: “In light of this and considering Destination Maternity has not been permitted by the Mothercare board to conduct customary due diligence, Destination Maternity is unwilling to increase the value of its proposal and has therefore decided to withdraw its proposal.”
The Mothercare board and certain shareholders had concerns about Destination Maternity’s ability to finance the combination of businesses.
However, Destination Maternity insisted that, subject to due diligence, it had negotiated the terms of an in-principle, non-binding, financing with a US private equity firm and had in principle received support from Bank of America Merrill Lynch to arrange debt financing.
Destination Maternity chief executive Ed Krell said: “We are disappointed that the shareholders of Mothercare have not supported our proposal and that the board of Mothercare was unwilling to allow us to conduct customary due diligence and engage in discussions with us regarding our proposal.
“We believe that there was a strong strategic rationale for the combination of these highly complementary businesses, which would have enhanced the product range of both companies, spanning the pregnancy to toddler life-cycle.
“We further believe the combination would have created a global leader in maternity, baby and children’s apparel and products capable of accelerating the growth and long-term development of both businesses across channels and in markets around the world.”
Mothercare said that it had no contact with Destination Maternity since its offer in early June. The retailer said: “With the appointment of Mark Newton-Jones as chief executive, Mothercare is now fully focused on the company’s plan to turnaround the UK business and to continue its strong international growth. The board remains confident in the ongoing execution of Mothercare’s strategy as an independent company.”