Reject Shop Ltd (ASX: TRS) shares are rocketing on Thursday morning.
At the time of writing, the ASX retail stock is up a massive 110% to $6.65.
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Why is this ASX stock rocketing?
Investors have been fighting to get hold of the discount retailer's shares this morning after it revealed that it has received and accepted a takeover offer.
According to the release, the ASX stock has entered into a binding scheme implementation agreement with Dollarama Inc. (TSX: DOL), which will see it acquire all shares in Reject Shop by way of a scheme of arrangement.
The release notes that Dollarama was founded in 1992 and headquartered in Quebec, Canada.
It is a recognised Canadian value retailer offering a broad assortment of consumable products, general merchandise and seasonal items both in-store and online. It currently has 1,601 locations located throughout Canada and also owns a 60.1% interest in Dollarcity, a growing Latin American value retailer that has 588 stores.
Huge premium
The two parties have agreed a price of $6.68 cash per share, which represents a 112% premium to its last closing share price of $3.15 per share. It values the ASX stock's equity at approximately $259 million.
Another positive for shareholders is that if the scheme becomes effective, the Reject Shop board intends to declare a fully franked special dividend of up to 77 cents per share. This will be payable prior to implementation of the scheme.
Though, the amount of the special dividend will be deducted from the scheme consideration. It is expected that eligible shareholders will benefit from franking credits of up to 33 cents per share.
The Reject Shop board unanimously recommends that shareholders vote in favour of the scheme. This is subject to the usual conditions. Its largest shareholders also supports the offer.
Commenting on the news, the ASX stock's chair, Steven Fisher, said:
Today marks a milestone in the journey of The Reject Shop. Attracting an offer from Dollarama, a recognised leader in the value retail market, is testament to both the meaningful improvement that our incredible team has made to our business over the past few years as well as the significant growth potential that exists for The Reject Shop.
The all-cash Scheme Consideration provides attractive value and certainty for all shareholders. The Board believes the proposed transaction will benefit both shareholders and stakeholders of The Reject Shop and is in line with the Board's priority to deliver shareholder value.
