Following a late October share price dive The Reject Shop (ASX: TRS) has been trying to rebuild its retail business another victim of the dismal Australian retail sector.
In late November, a newly incorporated company called Allensford (wholly owned by Kin Group), lobbed an "opportunistic" offer to The Reject Shop's shareholders.
The Reject Shop has today recommended that shareholders reject the Allensford offer, saying that it "undervalues [the] shares".
The Reject Shop chairman Bill Stevens says shareholders are being taken advantage of by Allensford.
"This offer by Allensford is an attempt to acquire the company on the cheap," says Stevens.
"It is opportunistically times soon after an earnings downgrade and subsequent institutional sell-off, and before shareholder begin to see the benefits of the significant investment we have made in growth initiatives."
Stevens continues to say that playing into Allensford's hands would be giving them "an early Christmas present".
"It is curious that the bidder has focussed so extensively on the downside risks of a company they say you should sell off; but they want to acquire," says Stevens.
"Our message to shareholders is clear don't give Allensford an early Christmas present because we have a clear plan and strategy for our business, and unlike what they would have you believe, we have confidence in the long-term prospects of The Reject Shop."
Since the Allensford offer was announced shares in The Reject Shop have been trading in excess of the value of the original bid ($2.70 per share).
Director of Allensford Nick Perkins says that he is surprised that The Reject Shop rejected the offer.
"Based on The Reject Shop's deteriorating trading results and with retail trading conditions tipped to worsen, we're surprised that the TRS Board has not recommended Allensford's all-cash offer," says Perkins.
"Our offer represents immediate and certain cash value for TRS shareholders in the context of the company's continuing deterioration in financial performance."
Shares in The Reject Shop are down 1.04 per cent to $2.85 per share at 10.34am AEST.
Business News Australia
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