Monsoon chief courts controversy with proposal for share buyout

The family of Peter Simon, the founder of the Monsoon fashion chain, launched a controversial offer to increase its stake in the company to 92.5 per cent yesterday in a move which was criticised as being the equivalent of "taking the company private via the back door".

The plan would involve the company moving from the main stock market to AIM. This could force some institutional shareholders to accept the terms as their mandates do not allow them to hold shares in AIM-listed companies.

If successful, the move could also limit the rights of minority shareholders who choose not to accept the terms. However, Mr Simon said he had no plans to launch a full bid. "The company is not going private .We still want a listing and access to capital markets. But having a full listing is expensive and time-consuming."

Stoneycroft, an investment vehicle owned indirectly by Mr Simon's children, said it was giving shareholders the option to sell their shares to the trust at 130p a share, valuing the company at £231m. This is only a modest premium to the previous day's close of 121.5p. Stoneycroft said the scheme had been approved by the Takeover Panel.

Various investment trusts of Mr Simon's company already own 72.5 per cent of Monsoon, but Stoneycroft is keen to buy another 20 per cent of the group's shares, taking the total holding to 92.5 per cent.

It has organised the offer via a put option over the shares. The option is available over two periods up to 29 September in a structure Stoneycroft said provided Monsoon shareholders with protection from potential falls in the stock market. However, the price of 140p per share (minus the 10p option payment) will only be available up until 22 July. After that, it will be calculated on a daily basis.

Mr Simon said he did not regret taking the company public in 1998. However, Monsoon has had a troubled relationship with the City. Its first attempt at a float had to be pulled because of uncertainty over who was behind some of the trusts that owned shares in the group. At its second attempt the shares were priced at a top of the range price of 198.5p. They limped up to 200p during the first day of dealings but never reached that price again.

Mr Simon is a former hippie who opened the first Monsoon shop in 1973 after deciding on the name because he was born during a monsoon in Sri Lanka. The group now has over 360 shops worldwide including the Accessorise chain of accessories stores.

It has carved a niche for itself in the fashion sector by offering ethnic style fashion. But the City has always been concerned that its high margins were unstustainable. The shares closed up 5.5p at 127p.