PAS Group Ltd share price soars 22% on takeover – Which retail stock is next?

Premier Investments Limited (ASX: PMV), Myer Holdings Ltd (ASX:MYR), Pacific Brands Limited (ASX:PBG) and OrotonGroup Limited (ASX:ORL) could all potentially find themselves involved in M&A activity.

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It looks like it's going to be a short-lived adventure as a listed ASX company for apparel wholesaler and retailer PAS Group Ltd (ASX: PGR) after the group received a takeover offer from the obscure Australian Brands Investment LLC which is linked to the relatively unknown Coliseum Capital Management LLC, a Connecticut-based firm.

PAS owns a range of well-known brands including Metalicus and Review, as well as holding Australian licenses over brands such as Slazenger and Everlast.

Background

PAG Group's initial public offer (IPO) occurred in June 2014 at a price of $1.15 per share. The stock has struggled to trade above its issue price with the shares recently trading as low as 40 cents before a takeover was announced this week at a price of 63 cents per share.

Retail and Apparel M&A on the rise

Last year leading department store operator David Jones was taken over by the South African based Woolworths for approximately $2.2 billion. With PAS Group now receiving an offer, it could be the start of further merger-and-acquisition (M&A) consolidation activity across the sector.

The Solomon Lew controlled Premier Investments Limited (ASX: PMV) has often been touted as a potential acquirer of retail brands which already is home to Smiggle, Just Jeans and Jay Jays amongst others.

At one point there was speculation that Lew may make a grab for Myer Holdings Ltd (ASX: MYR) with the murmurs becoming more intense when Lew hired ex-David Jones' CEO Mark McInnes to head up Premier Investments in 2011.

Other companies which have been underperforming and with depressed share prices that could attract potential suitors are Pacific Brands Limited (ASX: PBG) and OrotonGroup Limited (ASX: ORL).

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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