Destination Maternity issued a statement saying it was not interested in being acquired by French company Orchestra-Premaman and the stock gained 16 cents to trade at $9.15.
Destination Maternity is the world’s largest maternity retailer and is known for its brands Pea in the Pod and Motherhood Maternity. The company said it was not in the best interest of shareholders to enter into negotiations with Orchestra-Premaman, a children’s wear retailer based in France with no U.S. operations.
Orchestra-Premaman made an unsolicited, confidential and nonbinding merger proposal under which shareholders of Destination Maternity stock would receive shares of Orchestra and a limited amount of cash. The Orchestra-Premaman stock is traded on the Paris exchange and is illiquid and basically controlled by one shareholder who owns 90 percent of the company.
Over the past week, Destination Maternity’s stock had started moving higher — gaining 36 percent over the past five days. It had dropped from a year’s high of $16.74 to a low of $4.99 that it hit in November. In a Dec. 13 letter, Orchestra said it owned 13.3 percent of Destination Maternity’s outstanding stock and filed a 13-D notice with the Securities and Exchange Commission on Dec. 14.
Arnaud Ajdler, chairman of the board of Destination Maternity, wrote, “After serious consideration, and based on the preliminary discussions, the board unanimously decided that pursuing the stock-merger proposal would not be in the best interests of our stockholders considering the risks inherent in a primarily stock-based merger transaction dependent on uncertain revenue synergies.”
The company has not had the greatest year. Destination Maternity chief executive officer Anthony Romano recently took over the role of president after Chris Daniel left. The retailer reported that its comparable sales dropped 3.6 percent in the third quarter and the loss was blamed on slow traffic and warm weather. Destination Maternity also guided lower for the full year’s comparable sales.
Analysts on the recent earnings conference call questioned the company’s dividend policy and the level of debt it was taking on. There was also concern about the company’s turnaround continuing to get pushed farther and farther out.