Burberry: Speculation of a Hostile Takeover

Speculations suggest that the British company is activating defensive measures against a potential hostile takeover. Burberry has asked Robey Warshaw to help to prepare for this scenario, after a mysterious investor has acquired a 5% stake. According to several reports, Burberry have asked to HSBC, which is the depositary of the 5% stake, to identify the investor, which the bank would have rejected.

Bid rumors come after the stock market punishment it has received in recent times. Currently it is worth about 6.1 billion pounds, although it was worth less than 5 billion just six weeks ago, half than in early 2015. In addition, keep in mind that its free-float, or capital freely traded, is virtually 100% (99.7%). That means it does not have a shareholder that may oppose a hostile bid if the price is attractive

The market punishment was produced by the poor performance of its results. In recent quarters revenues have not met expectations, especially in the last Christmas, by falling demand in China and Hong Kong. This decline in China has particularly affected Burberry, which had clearly opted for Asia as its growth engine. Burberry has launched a cost-saving plan that includes closing unprofitable stores, which has not resulted yet.

Burberry surges 5% in London Stock Exchange, 30% more than its lows earlier this year. The purchase of that 5% deposited in HSBC and speculations on the hostile takeover have permitted to reduce to the half the losses accumulated in the last 12 months.

Disclosure: The Luxonomist not responsible for the views expressed in the article. The text was written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.

(Featured Image: Elisa Sednaoui, Alexa Chung and Suki Waterhouse wearing Burberry at the Burberry Womenswear February 2016 Show / Photo: David M. Benett)