The acrimonious takeover battle between Kathmandu Holdings Ltd (ASX: KMD) and Briscoe Group could be drawing to a close, but it's hard to figure out who's the winner from this.
Shareholders probably won't feel like they've won the upper hand given that Kathmandu's share price dropped 2.7% to $1.46 when the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up by over 1% this morning.
The New Zealand-based predator said it will not be extending or sweetening its takeover offer for Kathmandu unless enough Kathmandu shareholders accept the deal for the offer to become unconditional.
Kathmandu has thumbed its nose at the offer as it thinks it undervalues the adventure gear retailer and, as a parting shot, pointed out that it's very unlikely Briscoe can achieve the 90% acceptance level to make the takeover unconditional.
Under New Zealand's Financial Markets Conduct Act, a company is obliged to declare any change in its aggregate interest in a listed target when the acceptance of the offer representing 1% or more is received.
"As at 2 September 2015, Briscoe Group has not announced the receipt of any acceptances of more than 1% in relation to the Offer to the New Zealand Stock Exchange," wrote Kathmandu in a statement to the ASX.
Given that Kathmandu's share price remains below the offer price from Briscoe, the market suspects the deal will not get consummated. This means shares in Kathmandu could have further to fall as it was trading at $1.25 before Briscoe made its offer at the end of June and had even slumped to a three-year low of $1.11 earlier that month.
Briscoe will need to take some blame for the failure of its bid as its offer leaves too many unanswered questions and risks.
It said it will get a secondary listing on the ASX if it succeeds in acquiring Kathmandu and will pay a part-cash consideration that is priced in New Zealand dollars.
Briscoe is offering to swap five of its shares for every nine Kathmandu shares and pay a NZ20 cent cash consideration for each Kathmandu share. Its offer is good till September 17, 2015.
It's hard to work out what the value of Briscoe's post-acquisition share price is and local shareholders will have to wear the exchange rate risk. If Briscoe gave Kathmandu's shareholders more certainty, the offer might have gained more traction.
After all, it's hard to imagine there being much goodwill from investors to Kathmandu's management given its dismal performance.
Thus, the real winner from this is probably Kathmandu's bosses as they have bought more time to execute their turnaround strategy.
Like the turnaround strategies of other struggling retailers – think Woolworths Limited (ASX: WOW) and Myer Holdings Ltd (ASX: MYR) – it will take a long while before shareholders see any real results.
Don't be surprised to see Briscoe come back to take another bite.
