The chief executive of Beales has urged shareholders to accept an offer from a company controlled by property tycoon Andrew Perloff, which values the department store business at £1.2m.
The offer to buy Beales outright, made on Monday through Perloff’s investment vehicle English Rose, represents a discount of about 48% on Beales’ share price, valuing each share at 6p, compared with a closing price of 11.5p on January 16.
Beales’ board agreed to the “disappointing” offer, but said it could have achieved a higher price in different circumstances. The deal is now subject to shareholder agreement.
Beales, whose like-for-like sales fell 1.1% in the year to November 1 but rose 1% in the 26 weeks to the same date, tried to raise capital last year to stabilise and improve its performance. However, this was blocked by a group comprised of Perloff and his associates.
“The business is undoubtedly turning around, but it needs to turn around quicker and to do that it needs a significant cash injection, which Andrew’s offer presents,” chief executive Michael Hitchcock told Drapers.
“I would look at it as a car coming to a crossroads, where we tried to go forward to raise additional capital, but the road was closed. We could go right and carry on as we are, but there is substantial risk associated with that.
“Our other option is to turn left with Andrew’s offer. I believe that all stakeholders will benefit from looking at it sensibly.”
Perloff already owns 29.72% of Beales through various companies and associates, including Panther Securities, which holds 19.85% of the ordinary share capital. Panther also owns the freeholds on 10 of Beales’ 29 stores and has agreed a deal to buy another.
If his offer is successful, Perloff will provide a loan of £1m through his Portnard business, which owns English Rose, once the bid becomes unconditional and a further £1m once his team has undertaken a strategic review.
Beales and Perloff have had an uneasy relationship since the retailer removed Panther’s representative Simon Peters from the board in July last year, sparking a furious response from Perloff.
Chairman William Tuffy and non-executive director Catherine Norgate-Hart plan to resign from the board if the offer is accepted. English Rose said it intends to appoint Stuart Lyons as non-executive chairman and Andrew Perloff and Simon Peters as non-executive directors.
Perloff plans to re-register Beales as a PLC.
Perloff said: “We have a very heavy investment in the company already as the largest shareholder, the biggest landlord and the biggest creditor, with loans set to be repaid from 2016/17, so if we can help it to trade a little more successfully, then it is good for us. If we are in control, they will have an owner with money.”
The Beales management and English Rose directors are in agreement about the need to review and address the operation of certain loss-making stores and the need for investments for selective store refurbishments.
“If I could come out of the stores that are loss-making tomorrow, I would do it, but we can’t break the contracts,” said Hitchcock. He declined to give a number or the locations of the stores but confirmed he “could count the loss-making on one hand”.