Kirkham makes last-ditch bid for DFS

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The Independent Online

Lord Kirkham, the chairman of DFS, made an 11th-hour attempt last night to persuade recalcitrant shareholders to back his takeover bid, raising his offer to 455p per share.

Lord Kirkham, the chairman of DFS, made an 11th-hour attempt last night to persuade recalcitrant shareholders to back his takeover bid, raising his offer to 455p per share.

The new bid, worth another 10p per share, increases the value of the furniture retailer to £507m from £496m. It comes just days before the 7 September deadline for investors to vote on his previous offer.

Lord Kirkham, who has a 10 per cent stake in the company he founded more than three decades ago, is funding the extra £10m from his own resources, although banking sources said Nomura may refinance some of the additional £10m in due course. He ruled out the prospect of a higher bid, saying this was his "final offer".

Although yesterday's move was Lord Kirkham's third attempt to win round investors by raising his offer - from an initial indicative level of 415p per share - several shareholders were still unimpressed.

One top-10 investor said: "I think it's unlikely that this will change anything - it's a very modest increase. We started off with a low offer, then we moved to a lower one, and this is only a small improvement on that. The dividend is 17p but this is only 10p, so I think it's perhaps just a token gesture which he knows will be thrown out."

M&G and Morley, which own more than 14 per cent between them, both previously said they planned to reject the previous 445p-per-share offer.

Full Circle, Lord Kirkham's bid vehicle, said it would adjourn the extraordinary meeting until 23 September to give shareholders time to consider the new offer. DFS shares climbed 16p to 441p yesterday after the announcement, which was released just before the stock market closed, indicating that the City still expects Lord Kirkham to fail. The DFS chairman said he agreed to raise his bid only after "considerable debate" with the independent directors, led by Mike Blackburn, and not because he felt the furniture retail market conditions or DFS's circumstances had changed.

"To avoid any doubt, I wish to make it clear that this offer is final and will not be increased in any circumstances. This offer has been recommended by the independent directors as being fair and reasonable and in the best interests of DFS and all its shareholders," he said.

The influential National Association of Pension Funds last week urged shareholders not to back the bid on the grounds that the non-executives were not, in fact, independent.

The new bid values DFS at about 14 times earnings - a premium to some of the other takeout values for retailers such as Debenhams. To succeed, it needs acceptances from more than 75 per cent of shareholders because the offer has been structured as a scheme of arrangement. Lord Kirkham can not vote his 10 per cent stake. He said shareholders would still be entitled to a share of any net proceeds from a tax dispute worth some £57.5m that has dragged on for years.

Under the terms of an agreed inducement fee, Lord Kirkham will receive £2.4m should the independent directors withdraw their recommendation. If a higher offer is made, he stands to receive a £4.82m fee - but if shareholders just vote the deal down he will get nothing.

Matthew McEachran, at Investec Securities, said: "Now really it's in the hands of shareholders."

Separately, Deutsche Asset Management, formerly one of DFS's biggest shareholders, revealed it had sold down its entire holding.