Mothercare Stock Climbs As Destination Maternity Confirms Take Over Offer

(RTTNews) - Shares of Mothercare Plc (MTC.L) climbed around 15 percent in the morning trading in London after U.S.-based maternity apparel retailer Destination Maternity Corp. (DEST) confirmed its interest in the UK-based mother and baby retailer for a combination.

Responding to recent press speculation, Destination Maternity confirmed that it has submitted two non-binding written proposals to Mothercare, but were rejected by Mothercare Board. Mothercare has refused to engage with Destination Maternity on its latest increased proposal, which values Mothercare at about 266 million pounds or $453 million.

Destination Maternity said it continues to evaluate its options with regard to a possible combination.

Destination Maternity noted that its latest proposal is for a combination of the two companies under a new UK holding company, which would be listed in the U.S.. Under the offer, Mothercare shareholders would receive 300 pence for each Mothercare share, which would comprise 230 pence in cash and shares in the new holding company valued at 70 pence as of today.

Under a proposed a mix and match election, Mothercare shareholders could elect to receive more shares or more cash in an offer.

The latest proposal represents an increase of 9 percent - 20 percent to the original proposal made by Destination Maternity of 250 - 275 pence for each Mothercare share.

Destination Maternity's revised proposal represents a premium of approximately 29 percent to the closing price of Mothercare shares of 232.5 pence on July 1, and a premium of approximately 90 percent to the closing price of Mothercare shares on the last trading price before Destination Maternity's original proposal. The offer also represnts a premium of approximately 64 percent on the last trading price before Destination Maternity's second proposal on June 1.

According to Destination Maternity, a transaction, if consummated, would help Mothercare shareholders to realize a significant premium valuation for their investment, and would have the opportunity to participate in the combined group's longer term substantial value creation. The new company is expected to have about $1.7 billion in sales and about $2.5 billion in global network retail sales, operating through over 4,300 outlets.

The completion of a possible transaction would be subject, amongst other things, to the approval of Destination Maternity shareholders.

The company noted that the latest announcement does not constitute an announcement of a firm intention to make an offer, and consequently, there can be no certainty whether any formal offer for the company will be made.

Destination Maternity reserves the right to make an offer for Mothercare, at any time, at less than 300 pence:

Destination Maternity Chief E.ecutive Officer Ed Krell said, "We believe there is a compelling strategic rationale for a combination of Destination Maternity and Mothercare, which would create the undisputed global leader in maternity, baby and young children's apparel and products. ... This is consistent with Destination Maternity's stated strategic objective to enhance our position as a global leader in maternity apparel, including through international expansion."

In the offer, Destination Maternity is being advised by Bank of America Merrill Lynch and Skadden, Arps, Slate, Meagher & Flom LLP.

In London, Mothercare shares are gaining 36.75 pence or 15.81 percent, and trading at 269.25 pence.

Destination Maternity closed Tuesday's trading at $23.07, up $0.30 or 1.32 percent.