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The Reject Shop Receives “Opportunistic” $78m Takeover Bid

Struggling discount retailer The Reject Shop has received a $78 million cash takeover offer, a potential lifeline which it is now advising its shareholders to “take no action” on as the board examines the offer.

According to an ASX announcement on Wednesday, Allensford Unit Trust, owned by the Geminder family’s Kin Group, has instructed its broker Bell Potter to purchase The Reject Shop shares from today through to January 7 at $2.70 a share.

The offer comes after The Reject Shop cut its profit guidance by about 40 per cent in October, from $17.7 million to between $11 and $10 million, in response to a sales dip associated with low wage growth and mortgage rate increases.

Allenford urged shareholders to accept the bid offer as “The Reject Shop is facing significant challenges due to the discretionary retail environment in which it operates,” according to the bidders’ statement.

“Accepting this offer delivers certain and immediate cash value and removes shareholder exposure to the deteriorating financial performance of The Reject Shop and risks associated with continuing to hold The Reject Shop shares.”

The Reject Shop released a statement on ASX in response to the offer advising its shareholders to “take no action” as the Board considers the bid to be “opportunistic”.

The Reject Shop’s Chairman Willian Stevens said that “The Reject Shop Board continues to believe in the long-term growth prospects of our business which has remained profitable amidst the backdrop of a challenging period in the Australian retail environment.”

In October, managing director Ross Sudano was quoted saying that The Reject Shop was focused on the Christmas period to give the company some momentum.

“We are entering our key selling period and have a strong seasonal program in place, with a compelling value offer for Christmas and many tactical activities in place to drive sales,” says Sudano.

The Reject Shop shares were last trading at $2.43, falling 83% from a five-year high of $14.77 in August 2016.

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