Kathmandu Holdings Ltd (ASX: KMD) shares have skyrocketed this week following reports that it was a takeover target of fellow New Zealand-based retail group, Briscoe Group Limited.
In an announcement to the New Zealand Securities Exchange on Tuesday, Briscoe said that it had acquired a 4.99% stake in Kathmandu over time and had increased its shareholding to 19.9% with the intention to "lodge a takeover notice imminently". No communications had been held between the two parties at that point, nor was Kathmandu in a position to comment.
More details have emerged since then with Briscoe offering five of its own shares for every nine Kathmandu shares held, in addition to NZ$0.20 in cash per share, valuing Kathmandu at just over $300 million. Notably, Briscoe's shares could also lose value as a result of the dilution effect from issuing new shares, although the addition of Kathmandu's assets could offset some of the impact.
It appears that investors may have been somewhat disappointed by the latest announcement. Since hitting a high of $1.575 on Tuesday, the stock has retreated just over 4% to trade at $1.51.
Kathmandu said that at this stage it is not in a position to comment further. It also said: "Until the Board of Kathmandu has given further guidance, shareholders are strongly advised to take no action in relation to Briscoe's notice of intention to make a takeover offer."
Indeed, if Briscoe's offer falls through, Kathmandu's shares could be hit hard with shareholders left to deal with the mess. As such, investors should focus their attention on some of the market's other great buying opportunities.
