Billionaire retail mogul Philip Day is set to buy struggling clothing chain Bonmarché in a deal valuing the business at just £5.7m.
Edinburgh Woollen Mill owner Mr Day has acquired a majority stake in Bonmarché, meaning that under City rules he must make a bid for the whole of the company.
He warned he expected a “material reduction” in headcount at Bonmarché, which recently issued its third profit warning in six months.
Mr Day’s Dubai-registered holding company Spectre has offered 11.4p per share, significantly below Bonmarché’s closing price on Monday of 18p. Shares in the company crashed 20 per cent to 14p on Tuesday morning.
The takeover bid comes after the womenswear retailer said it expected to lose £5m to £6m this year after seeing “significantly weaker” trading since the start of March.
“The owner of Spectre, Philip Day, has a successful track record within the retail sector, especially in turnaround and distressed situations.”
Mr Day has been named as a potential buyer in several retail turnarounds including LK Bennett and House of Fraser.
He has also invested in Peacocks, Proquip, Austin Reed, Country Casuals, Jaeger and Jacques Vert.
Russ Mould, investment director at AJ Bell likened Mr Day’s approach to that of fellow retail billionaire Mike Ashley.
He said Mr Day “likes to acquire troubled groups out of administration, or while they are on the knees when trading as a public company”.
He added: “Day is looking to grab a bargain from the high street and has offered considerably less money for Bonmarché than its market value last night, having already built up a controlling stake.
“Taking the business private and out of the City spotlight would theoretically help the retailer to focus on a recovery plan and not have its every move scrutinised by investors.
“However, shareholders aren’t getting a good deal from the takeover so they would lose out should Day be successful in revitalising the business.”