Briscoe stands by Kathmandu takeover offer

Briscoe Group says its takeover target Kathmandu has been selling its products badly for years and it is standing by its offer.

But a Melbourne-based institutional shareholder in Kathmandu says it will reject the Briscoe bid.

Kinetic, which is thought to hold just under five per cent, said it believed Kathmandu could pull out of its low cycle and that the offer of $1.80 in shares and cash ‘‘significantly undervalues the company’’.

The battle for Kathmandu heated up on Thursday when its board officially rejected Briscoe’s offer and released some guidance on its full year results.

Briscoe’s managing director Rod Duke said he found the figures ‘‘well below’’ what he had expected.

Duke, who holds 19.9 per cent of Kathmandu, felt his offer was fully priced and that Kathmandu’s current share price would have fallen if it had not been supported by the takeover bid.

He said the offer, of 20c per share and five Briscoe shares for every nine Kathmandu ones, would remain on the table until September 17 unless it was extended.

‘‘We do know a fair bit about retailing and they don’t.’’

Duke acknowledged it was ‘‘a tough retailing market out there,’’ as exemplified by the recent failure of clothing companies, Shanton, Identity and Jeans Jones.

But he felt Kathmandu had offered excessively ambitious guidance, forecasting a 42 per cent jump in this year’s operating profit.

‘‘We believe that Kathmandu is a great brand and has good products, but by its own admission is failing to execute basic retailing fundamentals.

‘‘Anyone who follows Kathmandu closely will know that same store sales growth across the group has been in decline for the past four years. ‘‘

He also took issue with Kathmandu’s chairman David Kirk that Briscoe was not a good fit for the outdoor clothing company.

Duke said the elements that Kathmandu did well, design and production, would not change under him. The only differences would be in its marketing and business systems, which were ‘‘appalling’’.

‘‘They simply do not know how to manage inventories . . . there are some real serious questions about the pricing in stores . . . and we think their cost of doing business is outrageously high.

‘‘It’s almost unbelievable they can make a 60 per cent margin and can’t make any money.’’

In terms of Kathmandu wanting to go global, Duke said: ‘‘I’m just like them and if we controlled Kathmandu, we think it could go global as well. But right now, to be fair, they are an Australian-New Zealand company with two stores in the UK losing millions of dollars. Kathmandu’s development does not cease once they become part of a new group.’’

He was heading to Australia next week to talk to institutional shareholders.

Kathmandu has forecast an 11 per cent rise in sales and a jump in operating profit from 2015’s $33.7 million to $48.2m.

Both parties are releasing brokers’ research notes. Kathmandu cited a report from First NZ Capital which put the share price value at $1.90 or $2.47 including a premium for control.

Forsyth Barr put the share price at $2.25 to $2.93.