To accept, or not to accept the GUD bid for Breville, that is the question for Premier Investments and its chairman Solomon Lew.
The question seems to be whether the bid as it now stands is more valuable, or whether, with a bit of gentle agonising, Premier can get GUD to up the value of its all paper offer.
So it was a questioning Mr Lew at yesterday’s AGM for Premier in Melbourne.
He wasn’t very forthcoming in providing any help to Breville shareholders though about what Premier might do with its stake.
"Unlike other substantial shareholders of Breville we were not approached by GUD prior to the announcement of the takeover offer and we intend to wait for all relevant information to be available before making a decision that will be in the best interests of Premier shareholders," Mr Lew said.
"Breville has been a long-standing investment, it has been a successful investment for Premier, and we know the company and the space it operates in very well," Mr Lew said.
Premier holds around 30% of Breville’s capital.
According to a substantial shareholding notice, GUD has a firm acceptance for the offer from itself (it held 19.2% of Breville) and conditional acceptances for around another 20%.
It has bid one GUD share (worth $8.56 yesterday, down 12c) for every four Breville shares (worth $2.19 yesterday, down 6c).
At the time the offer was made in October, Breville was valued at $2.20 a share.
The closing price yesterday would put it around $2.16, an indication the market reckons there’s no other bidder and that it’s now down to a question of GUD sweetening the offer to get Premier and Mr Low to say ‘yes’.
Breville has rejected GUD’s $322 million paper bid saying the predator could pay a lot more.
But the GUD offer for Breville is only part of the equation for Mr Lew.
He told shareholders the company was extremely cautious about the economic outlook but saw 2009-10 earnings before interest and tax (EBIT) growth in line with market expectations.
"In the absence of external shocks our outlook for Australia is one of cautious optimism."
Premier Investments owns the Just Group with brands including Just Jeans, Jay Jays, Portmans, Jacqui E, Peter Alexander, Dotti and Smiggle.
Mr Lew said that for retailers the prospect of rate rises at Christmas were never welcome.
"However we also recognise that the real issue for retailers is the strength of the underlying economy and employment having people in jobs, earning wages and spending in our stores," he said.
"The apparel retail market is currently extremely competitive with significant discounting on the part of some of our competitors who are attempting to buy sales through lower margins."
He said the company had seen lower levels of group sales but had not been prepared to chase sales at the expense of margin.
"After 17 weeks of trading our total sales year to date have increased by 6.7 per cent with like for like sales being 2.7 per cent higher than last year.
"We consider this to be a credible performance in the current market environment.
"Consistent with the past practice of Just Group the Premier Board does not intend to provide specific earnings guidance at the time of our AGM.
"In 2008 the Premier Board did provide AGM earnings guidance for Just Group given the transforming effect the Just acquisition would have on the Premier accounts.
"The guidance was an anticipated 10% fall in Just Group EBITA. The actual result was a 3% increase on the prior year.
"The Premier board is however confident of increased EBITA growth in FY2010 in line with current market expectations."
Premier shares climbed 30c yesterday to end at $8.56.
