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Business Analysis & Features

Rebels move to stop Moss Bros wedding

Family shareholders step up attack over chairman's acquiescence to Baugur bid. Lauren Mills reports

Moss Bros shareholder David Moss has lambas-ted Keith Hamill, the struggling retailer's chairman, for failing to defend the high-street chain against a £40m takeover offer.

Hamill is due to step down as chairman of Moss Bros – whose brands include Savoy Taylors Guild, Canali and Hugo Boss – in April. He had hoped to leave on a high note, completing the sale to Baugur. But the row over control is becoming increasingly bitter, with Moss, a member of the founding family and a major investor, furious about the way in which Hamill is conducting the sale.

"Hamill's reputation is best served by flogging the business and not being succeeded by a strong, retail-minded chairman who drives the changes that are required," he said on Friday.

But Hamill poured cold water on Moss's attack: "It has nothing to do with my position. This is about doing the right thing for the company and the shareholders."

Moss insists the founding Moss and Gee families want to achieve the best outcome possible. "We are not emotionally attached to this. We are not saying we will never sell. But we think this business is worth more and deserves a board able to stand up and say that."

However, Baugur, the Icelandic retail raider, is determined to press ahead with a formal bid. Members of the founding families, who between them own 26 per cent of Moss Bros, believe the 42p-a-share offer undervalues the business.

"We are talking about a company with £150m of sales, £16m cash in the bank, no debt, no pension liabilities and a collection of well-known brands. It is worth twice what is being offered," said one insider.

In a move to scotch Baugur's plans, Michael Gee, a member of the Cecil Gee clan, whose chain became part of Moss Bros in 1989, is trying to raise funds to buy out its stake. He reckons the Icelandic investment fund would sell two-thirds of its 29 per cent holding in Moss Bros at around 50p a share. Last week he approached HSBC for backing. The outcome of the talks is not yet known.

There is certainly a rising tide of City sentiment that believes Baugur may turn from buyer to seller. "There is a sense they have overstretched themselves," said a City banker.

For the moment Baugur is keeping its cards close to its chest. The acquisitive investor, which already owns swathes of the high street from Woolworths to Oasis to Hamleys, is keen to be seen as a player in the mergers and acquisitions market. With the Icelandic economy causing concern, doubts are growing about the firepower of its banks.

Moody's, the credit agency, recently downgraded its ratings for the country's three largest banks – Kaupthing, Landsbanki and Glitnir – citing concerns about the quality of their assets after years of rapid growth.

While Baugur often teams up with such banks, other City sources believe the com-pany is determined enough to fund a bid out of its own pockets. So even if the families find a way to raise the cash, they reckon Baugur is not a seller at anything close to 50p a share.

"Why would they sell a stake at an effective loss when they may be able to buy the company cheaply, turn it round and make a profit out of it?" asked one retail analyst.

Certainly a deal this size is small fry to Baugur. Yet it is worth doing. The Icelanders plan to increase capital expenditure at the company, edit its brands and improve sourcing. They hope to revive the former glories of Moss bros– such as when shares soared after Prince Charles announced his engagement to Lady Diana Spencer, on the belief that wedding guests would hire their suits from Moss Bros.

Moss believes changes should have been initiated by the current management, regardless of ownership.

"It is an overdone myth that change can only be accomplished in the private arena. Moss Bros needs to buy better product, manage the brands better and take the business more upmarket. The board should get on with it."

Hamill disagrees. "It is generally accepted that strategic changes are easier in a company if it has gone private. It is also generally accepted it is difficult to operate a listed company below a certain size."