Weisfelds bail out Brown & Jackson: Husband and wife inject pounds 6m into Poundstretcher

Click to follow
The Independent Online
BROWN & Jackson, owner of the Poundstretcher discount chain which had warned that a dispute with its banks could force it out of business, was yesterday rescued by a pounds 6m cash injection from the founders of a rival discount chain.

Vera and Gerald Weisfeld, who sold their What Everyone Wants chain for pounds 50m in 1990, are acquiring pounds 6m loan notes that can be converted into ordinary shares on the basis of 25 shares for every pounds 1 of loan stock, at any time in the next three years - in effect, a price of 4p a share.

They are also being granted options to subscribe for 298.8 million shares, at 7.5p, over the same period. Brown & Jackson's shares closed 1.5p up at 4.5p yesterday. Before the warning about its banking facilities, the shares had been as high as 12.5p this year and, in 1990, they stood at 71.7p, after adjusting for rights issues.

If the Weisfelds exercise both options, they will own 41.46 per cent of Brown & Jackson, but are asking the Takeover Panel to waive the requirement for them to make a bid for the rest of the shares.

Ian Gray, who was brought in as chief executive after a shareholder coup two years ago, said he was delighted with the agreement. He said he had been concentrating on improving the systems and operating methods of the group.

'The Weisfelds have got expertise in the discount sector, especially in clothing which I believe will be a growth area. They believe the business could be better and they believe that they could help improve it.'

The Weisfelds contacted Brown & Jackson two weeks ago, shortly after it revealed that its banks were refusing to guarantee pounds 14m of working capital requirements. 'It is the type of business we know backwards,' Mrs Weisfeld said.

The couple will join the board as non-executive directors, for which they will be paid pounds 15,000 each. They will also act as consultants to the group for pounds 500 a day, to a maximum of pounds 25,000 a year.

The Weisfelds founded WEW in 1971, building it into a chain of 37 discount stores, with sales of pounds 75m, before selling it to Amber Day - now renamed WEW - in 1990. Poundstretcher has sales of about pounds 150m a year, but lost pounds 10.5m in 1993. Brown & Jackson said that sales this year were 4 per cent ahead of last year, but as banking difficulties had deterred some suppliers, growth could slow.

Profits at QS Holdings, the discount retailer, fell 39 per cent to pounds 5.2m before tax in the year to 28 January. The decline, forecast at the half-year, reflected a poor summer and higher costs because of sterling devaluation. The dividend was, however, held at 5.19p on earnings down from 14.22p to 8.49p.

View from City Road, page 26