Godfreys has urged shareholders to accept a 32 cent per share takeover offer lodged by the vacuum retailer’s co-founder, 99-year-old John Johnston.
Johnston, who started Godfreys in 1936 with business partner Godfrey Cohen in Melbourne, launched a 32 cent per share all-cash bid last month through his family-owned Arcade Finance, which already holds a relevant interest in approximately 25.43 per cent of Godfreys shares.
Godfreys had appointed an Independent Board Committee (IBC) to assess and respond to the takeover offer. On Wednesday, 9 May the IBC, comprised of four non-executive directors of Godfreys independent of Arcade; Brendan Fleiter, Sue Morphet, Penny Burke and Kathy Gramp, recommended shareholders accept the offer.
Godfreys chairman Brendan Fleiter said the IBC had reviewed the offer against prospects for Godfreys, which included Godfreys’ implementation of the turnaround strategy; its ability to meet its obligations under its current financing arrangements; and its ability to obtain alternative funding on favourable terms.
“While good progress has been made, in delivering operational efficiencies and progressing those key areas identified requiring further investment, there is no guarantee as to the benefits that the turnaround strategy will realise, nor the time required to realise these benefits,” Fleiter said.
“Current retail environment and trading conditions also remain challenging which is expected to make it difficult for Godfreys to meet its obligations under its current financing arrangements.”
It follows the announcement by Godfreys like-for-like sales have dropped 27 per cent compared to the same time last year, with year to date like-for-like sales also down 7.8 per cent compared to last year.
Godfreys attributed the sales decline to changes made to its television advertising campaign in April and May, designed to reduce the company’s reliance on current discount and sales-based approach by focusing more on product features and benefits.
Godfreys said the marketing changes “have not resonated with Godfreys existing customer base and as such the company as reverted to the previous television advertising approach”. The retailer expects underlying EBITDA for FY18, before restructuring and one-off costs to be approximately $3.5 million.
Debt negotiations with Arcade are set to begin next week, 11 May. The offer is scheduled to close at 7.00pm (Adelaide time) on 24 May, 2018.
