N Brown in surprise buyout by Alliance family, Frasers agrees to sell shares

In an unexpected move on Thursday Simply Be, JD Williams and Jacamo owner N Brown Group announced an agreed takeover deal that will see it being delisted from the stock exchange.

It’s recommending that the offer by Falcon 24 Topco Limited (or ‘Bidco’) is accepted, Bidco being a newly formed company owned and controlled by Joshua Alliance. He’s a major shareholder in the business and a member of the family that has held the majority stake for many decades.

N Brown’s shares closed at 27p each on Wednesday (valuing the firm at just over £126 million) and the offer is for 40p a share in cash (48.1% higher), valuing it at £191 million.

The offer is also at a 111% premium to the average share price over the past 12 months and 63.8% to the average price in the last 90 days.

Of course, the big question in such situations is: what will Frasers Group do? N Brown is another of those companies in which Frasers has a chunky stake (over 20% of the voting rights in this case), so its views really count.

But that potential curveball has been dealt with as the announcement of the deal included the information that Frasers has been consulted and is in agreement regarding the takeover (more of that later).

So let’s look at the details. The deal will be implemented via a court-sanctioned scheme of arrangement under the Companies Act 2006.

Bidco and the independent directors of N Brown have reached agreement for Bidco to acquire all the shares not currently owned or controlled by Joshua Alliance.

Alliance controls 6.6% of the shares at present with other Alliance family members controlling 53.4%.

Eligible N Brown shareholders can also choose to receive one unlisted ordinary share in the capital of Bidco for each N Brown Share.

Bidco said the thinking behind the deal is that “in light of N Brown’s current shareholder structure and very low trading liquidity, and the limited UK fund manager appetite for small-cap consumer stocks, N Brown is not benefitting from being listed on the AIM market, whilst having to bear significant costs associated with its listing”.

And it believes that the deal “presents an opportunity to acquire a portfolio of well-established fashion brands, supported by an innovative financial services platform, with a long history and heritage in the UK clothing and footwear market. Bidco believes that it can support N Brown in accelerating its long-term growth potential, and that it can provide, where needed, access to additional capital, expertise and resource to accelerate the longer-term potential of the business”.

It added that it has confidence in N Brown’s current executive team and its leadership, specifically Steve Johnson (interim chair and CEO) and Dominic Appleton (CFO).

As for Frasers Group, the deal announcement said Bidco has “received an irrevocable undertaking from [it] to vote… in favour of the scheme at the court meeting and the resolutions at the general meeting… in respect of all of the N Brown Shares owned or controlled by it, representing approximately 20.3% of N Brown’s issued share capital”.

It has also said Frasers won’t choose the share alternative and so will receive the cash consideration assuming the deal goes through.

It means N Brown now has irrevocable undertakings in favour of the deal for 70.8% of its issued share capital and 78.2% of the shares eligible to vote at the court meeting. 

Joshua Alliance said of all this: “My family have been supporters of N Brown for over half a century, providing capital and having been involved in the strategic leadership of the business. This transaction will support N Brown in accelerating its long-term growth potential and provide, where needed, access to additional capital, expertise and resource to accelerate the longer-term potential of the business… We will be able to achieve this growth potential more successfully away from the public markets.”

And CEO Steve Johnson added: “N Brown continues to consistently serve its loyal and otherwise underserved customers, with exciting long-term prospects for the business. We continue to deliver on our strategy for growth, enabled by a sustainable and efficient operating model, and supporting our people and talent. Today’s announcement from Bidco will enable us to accelerate that strategy for the benefit of all our stakeholders.”