1. Market Data
July 2, 2014

Mothercare rejects Destination Maternity £266m takeover offer

UK-based clothing retailer Mothercare has rejected two takeover approaches from Destination Maternity saying the bid undervalued the company.

UK-based clothing retailer Mothercare has rejected two takeover approaches from Destination Maternity saying the bid undervalued the company.

Destination Maternity, the operator of A Pea in the Pod and Motherhood Maternity stores in the US, contacted Mothercare in May and again in June with a £266m offer.

This is the latest example of a US company seeking to buy a foreign firm in part to take advantage of lower corporate tax rates abroad.

Mothercare chairman Alan Parker said, "The board has given these proposals full and thorough consideration…we do not believe they reflect the inherent value of Mothercare to our shareholders or its prospects for recovery and growth."

Over recent quarters, the retailer has been hit hard by cut-price competition from supermarket groups and online retailers in its main UK market.

Following this, Mothercare issued a profit warning in January blaming weak Christmas sales.

The company has been trying to fight back by revamping UK stores, closing weaker ones and expanding online and abroad.

It planned to revamp loss-making British operations by 2015.

Presently, the retailer operates more than 1,200 stores worldwide.

Destination Maternity CEO 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.

"We are seeking to engage with the board of Mothercare on a constructive basis with the goal of completing a recommended transaction," Krell added.