The shares of Specialty Fashion Group Ltd. (ASX: SFH) are up a whopping 25% to 65 cents today after the fashion retailer confirmed media reports that it had received a confidential, indicative and non-binding proposal from a Middle Eastern investment company.
According to the release the unnamed investment company has offered 70 cents per share in cash in order to privatise the owner and operator of brands such as Rivers, Miller, and City Chic.
That offer equates to a premium of almost 35% on the last close price of 52 cents.
Following extensive discussions, management has now granted the investment company due diligence.
However it has warned that at this stage the proposal is subject to a number of conditions and there is no certainty the proposal will result in a successful transaction.
What now?
This looks like a great deal for shareholders in my opinion. I can't say I'm a big fan of the loss-making Specialty Fashion Group.
Although sales rose 4.4% to $826 million in FY 2016, the company still wasn't able to turn a profit and posted a disappointing $2.2 million loss.
This was the second year in a row that the company posted a loss and I'm not confident that the trend will be reversed in FY 2017 either.
As a result I see this takeover approach as a great opportunity for shareholders to reallocate funds elsewhere in the industry.
Two quality retailers that I would focus on instead of Specialty Fashion Group are Premier Investments Limited (ASX: PMV) and Bapcor Ltd (ASX: BAP).
Both companies have strong growth prospects that make them stand out picks in the retail industry in my opinion.
