LONDON — What’s next for Harvey Nichols? Deutsche Bank, the retailer’s largest institutional investor, has announced plans to block Dickson Poon’s bid for 100 percent of the U.K. department store chain during a shareholders’ meeting next Monday.
The bank’s decision follows a statement issued Friday by Broad Gain Investments, a Dickson Poon company, that $3.85 per share — the original offer price for the 49.9 percent that Poon does not already own — was its final offer.
It also follows poor first-half results at Harvey Nichols, where earnings per share plummeted 36 percent to 83 cents. Figures are translated from pounds sterling at current exchange rates.
“We will vote against the offer price at the shareholders’ meeting,” a spokeswoman for the bank said Monday. “At this point, there is clearly no scope to negotiate a higher price. The ball is now in their court.”
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As reported in WWD in September, Deutsche Bank said it wanted to hold onto the Harvey Nichols stock and support it in the long term. The bank also said Poon’s offer undervalued the company.
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Deutsche Bank holds 15 percent of Harvey Nichols, the equivalent of 30 percent of shares currently traded on the London Stock Exchange. To push the bid through, Poon needs approval from shareholders representing 75 percent of the stock held by the public, making Deutsche Bank’s approval critical.
Poon currently holds 50.1 percent of Harvey Nichols. His bid represents 35.5 percent premium over the closing price of $2.84 on Sept. 17 — just before the bid was announced. His proposal would put the total capitalization of Harvey Nichols shares at $212 million.
Poon has said he wants to delist the firm because it is not realizing any material benefit from its listing, due to its small market capitalization and relative stock illiquidity. He says $3.85 per share represents good and certain value for shareholders in turbulent equity markets, and that the store is not realizing any material benefit from its listing.
A spokeswoman for J.P. Morgan, which is acting on behalf of Broad Gain Investments in the deal, declined to comment.
Industry sources, however, said Poon believes now more than ever in the $3.85 per share price. One source, who spoke on condition of anonymity, said the disappointing interim results, the threat of a war in Iraq and its potential impact on tourism and the downsizing going on in London could further damage the store’s profitability.
“Dickson Poon thought the offer was getting more attractive every day, which is why he made that statement on Friday,” the source said.
Now that Deutsche Bank has thrown down the gauntlet, the source said Poon has three alternatives. He can walk away — and risk watching the share price collapse as a result of the aborted bid; he can let Deutsche Bank block the offer next week — and then buy shares on the open market, or he can reconstitute the offer in such a way that it would require approval from 50 percent of the stock held by the public.
The source said that no decision has been made yet.
Meanwhile, Harvey Nichols announced its results for the six months ended Sept. 28. Sales in the period rose 6.7 percent to $106.4 million — due chiefly to new store openings in Birmingham and Edinburgh. However Same-store sales were down 0.8 percent against last year, and comps in the Knightsbridge store, which generates more than 75 percent of group sales, were down 2.9 percent.
Fashion sales at the Knightsbridge store fell by 2.3 percent.
Net profit in the period dropped 36 percent to $4.5 million from $7 million. The decline was due, the company said, to the drop-off in sales at Knightsbridge, coupled with increased warehousing, logistics and insurance costs and a higher tax rate.
Nichols added that same-store sales rose 5.3 percent during the first four weeks of the second half, but they had still not reached pre-Sept. 11 levels.
The outlook for the rest of the fiscal year is not promising: “Trading at Knightsbridge remains difficult and volatile…the outturn for the year is uncertain and very much dependent on the sales performance at Knightsbridge for the remainder of the financial year,” said the firm’s statement.