Findel PLC (LON:FDL) has urged its shareholders to reject a £140mln offer from Mike Ashley’s Sports Direct International PLC (LON:SPD).
The British home shopping company said the 161p per share cash offer is “opportunistic” and “significantly undervalues Findel and its future prospects”.
Sports Direct announced its takeover bid for Findel earlier this month after its stake in the retailer surpassed 30%.
READ: Sports Direct makes £140mln bid for online discount retailer Findel
At the time, the sportswear retailer said it had no intention of messing around with Findel’s management or business strategy.
“Sports Direct's offer provides no compelling reason as to why 161p per share represents a fair price, especially given the operational and financial progress made in transforming the group into a market-leading online value retailer,” said Findel chairman Ian Burke said in a statement on Wednesday.
“As stated in its offer document, Sports Direct endorses the strategic plans that the Findel board is implementing, and is supportive of the Findel leadership team delivering these.
“It is against this backdrop that the board is unanimous in its recommendation that shareholders reject the offer and take no action."
Findel sells some of Sports Direct’s products through its Studio business, which used to be known as Express Gifts.
Sports Direct ownership would dilute share price, says Findel
The group thinks the bid represents a big discount to fair value, to the undisturbed share price of 250p and to analyst target prices that range from 300p to 350p.
It said its recent share price performance “does not reflect the underlying financial performance of the group”.
Findel added that control by Sports Direct would lead to an 8.8% dilution in the value of shares.
The company said its UK online value retail business and school equipment supply unit both have major potential as it executes its “digital-first, value-led strategy” to ensure a “sustained track record of financial and operational success”.
Findel maintained its full-year expectations for pre-tax profit to be towards the upper end of market forecasts of £26mln to £28mln as current trading is “strong”.
Harrods of the high street
Sports Direct has been building up its retail empire, having recently taken over House of Fraser and Evans Cycles, as part of Ashley's ambition to become the "Harrods of the high street".
Ashley is also weighing up a £61.4mln offer for troubled department store chain Debenhams PLC (LON:DEB), in which he holds a near 30% stake in through Sports Direct.
READ: Mike Ashley sets out terms and conditions of possible £61mln cash offer for Debenhams
Debenhams said it would consider a takeover bid but will still press ahead with its controversial plans to secure a £200mln lifeline from lenders because any offer would not address its immediate funding requirement.