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US private equity firm Bain Capital reiterated yesterday that it would not increase its $3.50 billion (R25 billion) bid for fashion retailer Edgars Consolidated Stores (Edcon) after a prominent fund manager called the offer 50 percent too low.

April 13, 2007

By From Reuters

Johannesburg – US private equity firm Bain Capital reiterated yesterday that it would not increase its $3.50 billion (R25 billion) bid for fashion retailer Edgars Consolidated Stores (Edcon) after a prominent fund manager called the offer 50 percent too low.

“There was a globally run auction to find buyers. It was announced in the press and ran for four months. During this time, no new bidders surfaced,” said Bain Capital managing director Dwight Poler.

The firm had declared its bid final after an extensive auction and it would not be legal to increase the bid unless there was a higher fully financed bid on the table, he added.

Templeton Asset Management’s Mark Mobius, who oversees close to 3 percent of the Edcon stock, said last week that the offer price was 50 percent too low. “We expect a much better price going forward,” he said.

Poler said the firm had received overwhelming support for its bid because of the high premium offered for Edcon.

Edcon said Bain’s offer represented a 61.6 percent premium to the 30-day volume-weighted average price of Edcon ordinary shares on October 16, the day before the group first said it was in talks.

Poler said only a very small group of investors had said the offer was 50 percent too low. “But the price dipped when that suggestion was first made in an article, suggesting the market was more concerned that the premium bid could be lost,” he added.

Bain beat out large private equity firms such as Kohlberg Kravis Roberts and Blackstone Group in auction for Edcon.

Aberdeen Asset Management and Columbia Asset Management, which each control 2 percent stakes in Edcon, have also said the Bain offer was too low.

But South Africa’s Coronation Asset Management has said the Bain offer was within a range of acceptable offers for Edcon.

Gryphon Asset Management chief investment Abri du Plessis said it would not make sense for Bain to increase its bid. “It is a straight offer and they are not trying to swindle shareholders.”

Poler said Bain planned to invest heavily with a lower-cost capital structure to build Edcon’s credit business and roll out new stores to meet the growth of the country’s emerging middle class.

Edcon is set to ask shareholders on Monday to approve the Bain offer. Its shares will be delisted from the JSE on May 18 if shareholders and the high court approve the transaction.

Shares in Edcon dropped 0.42 percent to close at R44.85 yesterday. The retail sector rose 0.08 percent.