The board of Beales has agreed to a discounted cash offer from a company controlled by property tycoon Andrew Perloff, which values the department store chain at £1.2m.
The offer, which comes via the company English Rose, represents a discount of approximately 48% and values the shares at 6p per share, down from the closing price of 11.5p on January 16.
The board has recommended the offer but said the price is “disappointing” for the 29-store retailer and that it could have achieved a price that valued the business and assets of Beales more fully in different circumstances.
It follows attempts made by Beales to raise additional capital that the retailer suggests were blocked by Perloff and his associates.
“The complex capital structure inherited by the current Beales Board imposes a number of restrictions on Beales’ ability to fund its activities, including the requirement for the concert party [Perloff and his associates] to agree to any of the alternative funding options the Beales Board has identified,” said Beales in a statement.
“As a result, Beales may be unable to generate sufficient cash flows to meet its financial commitments in the future.”
The board urged the shareholders to carefully consider the future risks facing the Beales Group, and suggested they accept the offer, depending on their own individual circumstances and appetite for risk.
English Rose is wholly-owned by Portnard, which is owned by Andrew Perloff and family trusts of Perloff and his brother Harold.
Perloff already owns 29.72% of Beales through his various companies such as his property group Panther Securities, which holds approximately 19.85% of ordinary share capital.
He is also the sole beneficiary of the Maland Pension Fund, which holds approximately 8.71% of Beales’ issued ordinary share capital, while he and his wife own approximately 1.16%.
If Perloff is successful in his offer, he has committed to provide financial backing to improve the future security of the business, its employees and the Beales pension schemes.
He also plans to re-register Beales as a private limited company.
William Tuffy, chairman of Beales, said: “English Rose’s proposal offers the certainty of a cash exit for shareholders today and improves the medium term financial security of the Beales business.
“Despite the significant progress made by the current management team in first stabilising and then greatly improving operating performance, the business continues to face significant challenges and financial constraints. The board of Beales has explored all other realistic alternatives to raise additional capital to address these challenges and constraints but none could be delivered without the concert party’s agreement and consequently, we believe that this proposal represents a better alternative for all stakeholders than the business continuing with its current capital structure, given the level of risk this would entail.”
The Beales Group’s sales including concessions and VAT were 1.1% lower for the 26 weeks to November 1, 2014 and 3.7% lower for the full year to November 1, compared to the same periods in 2013.
The declines include the impact of closing loss-making stores at the end of leases and the forced exit from stores by landlords at the end of leases due to site redevelopment.
Like-for-like sales including concessions and VAT were 1% higher for the 26 weeks to 1 November 1, 2014 and 1.1% lower for the year, during the same periods in the previous year.
The chain stopped its ‘mega’ promotions which had generated increased sales at little or no margin during previous years. It said the nine weeks to January 3 had proven “challenging and variable”, with a weak autumn followed by strong Christmas and New Year period.
The company said the underlying net positive momentum generated through the mildly improving macro-economic environment, more positive consumer sentiment and operational improvements, continues.
The Beales management and English Rose directors are said to be in broad alignment about the need to review and address the operation of certain loss-making stores and the need for investments for selective store refurbishments.