Mothercare share price back in the doldrums as suitor drops bid

It looks like the Mothercare acquisition is off: shares opened 11% lower this morning when US company Destination Maternity announced it was pulling out of the deal.

by Emma Haslett
Last Updated: 28 Jul 2014

It hasn’t been an easy few years for babywear retailer Mothercare, but earlier this month it looked like its guardian angel had appeared, as US rival Destination Maternity put in a £266m offer for the company.

What usually happens in these situations is a sort of corporate version of a Victorian courting ritual: the buyer puts in an offer; the subject of the deal looks demurely down at its feet, rejects the offer and bats its eyelashes; the buyer puts in a higher offer, and so on and so forth. That keeps going on until the company’s chaperones (aka boards) finally agree to a deal, and the two trot happily into the sunset together.

But it looks like Destination Maternity wasn’t into playing games: the company issued a statement this morning saying it couldn’t pay the price Mothercare shareholders wanted.

‘It is clear that the shareholders of Mothercare believe that only a very significant increase in the value of the such a proposal would be acceptable. 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.’

Shareholders immediately threw their hands up in frustration, causing shares to fall more than 11% in early trading. But to be honest, Destination Maternity may have dodged a bullet: 10 days ago, it issued a profit warning saying sales had been ‘considerably weaker’ than expected, and that they would fall below its expectations of $138m.

So this isn’t really the time to be splashing £266m on a new acquisition – particularly one that posted losses of £21.5m last year, and has lost both chief exec Simon Calver and finance director Matt Smith in the past few months.

Like all spurned lovers, Mothercare will be left to pick up the pieces and wonder whether it was too aloof. Mark Newton-Jones, the retailer’s new chief executive, doesn’t have an easy few months ahead of him.

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