Crew Clothing owner Brigadier Acquisition Company is looking to retract its £22.6m deal to buy menswear chain Moss Bros, a month after making the offer.
Brigadier has informed the Moss Bros board that it is seeking a ruling from the Takeover Panel, an independent body that regulates takeovers and mergers, in order to “invoke a condition of its offer and lapse its offer”.
Moss Bros said it will challenge the retraction attempt on the grounds that Brigadier must have a reason of “material significance” to pull out, under the Takeover Code rules.
The retailer’s board said it will ”take all necessary action to make its case that those requirements have not been met and that they offer should not, therefore, be permitted to lapse”.
A Moss Bros spokesman told Drapers: ”The clause referred to is the material adverse change clause. This is a very generic clause that is in every takeover. The Takeover Panel sets a very high bar for bidding companies to be able to invoke this clause and the board of Moss Bros will argue strongly against this.”
The legal view: Guy Morgan, corporate partner at Fox Williams
It’s very common to include in offers, in addition to specific conditions, a long list of generic material adverse change conditions. I imagine that [Brigadier Acquisition Company] is attempting to trigger one of those conditions on the basis of coronavirus.
There is precedent that you can put the conditions in your document but can only rely on it if the matter is of material significance to the buyer in the context of the offer. You might logically say coronavirus is of material significance to the offeror, however, the takeover panel may not agree and imposes an exceptionally high hurdle to bidders seeking to reply on those sorts of conditions.
If you’ve specifically identified an issue in advance of an offer in your offer document as being something you’re specifically concerned about, rather than just adding four pages of general conditions then you have a higher likelihood of being able to rely on this material adverse change condition.
I’m not sure I’m aware of any offers that have been pulled based on one of these general conditions.
It was announced on 12 March that Brigadier, which is controlled by Menoshi Shina, owner of Crew Clothing, had agreed to pay 22p a share for the menswear tailoring business. The acquisition was expected to be completed in the second quarter of 2020.
On 26 March Moss Bros revealed it was halting online operations, after closing all stores, to protect its staff during the coronavirus pandemic.
A meeting for Moss Bros shareholders to approve the takeover deal will go ahead as scheduled on 29 April.
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