Shares in Bonmarche plunged more than 25 per cent after the retailer reversed its view on a cut-price takeover offer from billionaire Philip Day due to poor trading in the first quarter.
In a dramatic U-turn the French-themed womenswear chain said it now believes Day’s offer is “fair and reasonable”, and urged shareholders to accept it.
Last month Bonmarche dismissed the bid, saying it “materially undervalues” the firm’s future prospects.
The sudden change of tack comes amid continued poor trading, which the company blamed on underlying weakness in the clothing market and poor weather.
Bonmarche warned there is a risk it may not meet its profit expectations for the full year.
“The achievement of a profit before tax result which is in line with the board’s expectations is possible, but there is a significant degree of uncertainty attached to this, and risks are more heavily weighted towards the downside,” the retailer told investors.
Paul Mumford, fund manager at Cavendish Asset Management, which holds a 10 per cent stake in Bonmarche, said his firm was “disgusted” at the retailer’s decision to backtrack.
“Bonmarche has simply capitulated without consulting majority shareholders, or even putting up a semblance of a fight,” he said.
Previous profit warnings from the retailer alerted investors that it expects a £6m loss for the year to the end of March when it reveals results in July.
But today’s profit warning after weak first quarter trading relates to the current financial year.
Day, who already owns a majority stake in the retailer, hopes to take the firm private through his Dubai-registered Spectre Group in a £5.7m deal.
The Edinburgh Woollen Mill owner has outlined a rescue plan that would see redundancies among Bonmarche’s 1,900 staff, as well as a string of store closures.
While Bonmarche has reversed its position on the offer, it maintained that the bid did not “adequately reflect the potential longer term value of the business”.
“The board continues to welcome the opportunity to engage with Mr Day, who has, as yet, not taken up the offer to discuss future plans for the business, and believes that, with his sector experience, he would be a successful long term owner,” the firm said.