LONDON (Reuters) – Britain’s Carpetright <CPRC.L> is in talks with its largest shareholder Meditor over a possible takeover at a huge discount to its closing value on Wednesday, prompting a 50% crash in its shareprice.
The floor coverings retailer, which trades from about 330 stores, has been struggling for years and fought off collapse last year by entering a Company Voluntary Arrangement (CVA) restructuring that closed shops and reduced rents.
The retailer said on Thursday that Meditor, an investment management company which holds just under 30% of its equity, has indicated an offer price of 5 pence per share in cash. Shares in Carpetright closed Wednesday at 9.12 pence, valuing the business at 27.6 million pounds ($35.7 million).
The stock was down 50.3% at 4.6 pence at 0836 GMT.
Carpetright said it needed 80 million pounds to repay debt facilities, meet ongoing working capital requirements and provide capital to execute its strategy. Having explored various long-term financing solutions it had entered into the talks with Meditor.
“The possible offer…would put in place a new financing structure for Carpetright which would enable us to continue our recovery and make necessary investments in improving our business,” said Chairman Bob Ivell.
If an offer is made, and is successful, Meditor would convert the majority of Carpetright’s debt into equity and provide additional capital, thereby providing the firm with a stronger balance sheet, it said.
Carpetright has received irrevocable undertakings to vote in favour of the possible offer from shareholders representing a further 24% of its shares.
Under Britain’s takeover rules Meditor has until Nov. 28 to make a firm offer for the company.
The group said it had achieved like-for-like sales growth in its first half.
“However, the ongoing impact of negative consumer confidence and Brexit on the current retail environment could present a challenge in the balance of the financial year,” it warned.
($1 = 0.7728 pounds)
(Reporting by James Davey; editing by Kate Holton)