Austin Reed snubs £42m bid approach from Dawnay Day

The fashion chain Austin Reed yesterday rejected a £42m cash offer from the activist investors Guy Naggar and Peter Klimt, who already hold a large minority stake in the business.

A statement from the clothes retailer said that a 131p-a--share offer the two mens' investment vehicle, Dawnay Day, "significantly undervalues Austin Reed and its prospects" and urged shareholders to take no action. Austin Reed shares advanced 7.75p to 126.75p.

Dawnay Day, which already owns 29.88 per cent of Austin Reed shares said that its offer represented a 10 per cent premium to the company's closing share price on Thursday, and was 24.7 per cent higher than the average price over the past 12 months.

The investment company, which bought 75 German department stores last year as part of a €500m (£340m) investment in the country, stressed it had given no firm commitment to bid.

A 3 per cent shareholder in Austin Reed is Kevin Stanford, the joint founder and former chief executive of Karen Millen, the women's fashion chain sold to Baugur of Iceland for £120m.

Takeover speculation has followed the chain for months. Earlier this year, Alan Charlton joined as finance director from Arcadia, Sir Philip Green's Topshop-to-Wallis fashion group. His arrival fuelled rumours that the management of Austin Reed was mulling an offer for the company.

In June, Nick Hollingworth, Austin Reed's chief executive, unveiled fresh evidence of its continued recovery. Like-for-like sales across its 105 stores and 153 concessions were 9.3 per cent higher in the 19 weeks to 10 June than in the comparable period last year.

Mr Hollingworth also claimed that older shoppers buying upmarket labels were supplanting younger customers whose credit had dried up.

In 2004, takeover talks with the Glasgow retailer Slater Menswear came to nothing. Austin Reed also caught the eye of its founder's great-grandson Nigel Robertson, and the entrepreneurs Richard Thompson and Jonathon Rowland.