The Reject Shop board backs Canadian retailer Dollarama’s $259m takeover proposal

The Reject Shop (ASX: TRS) has received a $259 million takeover offer from Canadian discount retailer Dollarama priced at $6.68 per share.

The all-cash deal represents a 112% premium to the $3.15 closing price of The Reject Shop shares on 26 March and a 117% premium to the six-month volume-weighted average price of $3.21.

The Reject Shop board has unanimously recommended shareholders vote in favour of the takeover and majority shareholder Kin Group (20.8% equity) has confirmed its intention to do the same.

Special dividend

If the scheme becomes effective, The Reject Shop board intend to declare a fully franked special dividend of up to $0.77 per share.

Any such payout would happen prior to the takeover going ahead and deducted from the scheme consideration.

Eligible shareholders could benefit from franking credits of up to $0.33 per share as a result of the special dividend.

The company has appointed UBS Securities Australia as its financial adviser to the transaction and SBA Law will act as its legal adviser.

Milestone achievement

The Reject Shop chair Steven Fisher said the Dollarama offer signified a milestone achievement in the company’s journey.

“Dollarama is a recognised leader in the value retail market and this takeover offer is testament to the meaningful improvement that our incredible team has made to our business over the past few years, as well as the significant growth potential that exists for The Reject Shop,” he said.

“The scheme consideration provides attractive value and certainty and the board believes the proposed transaction will benefit shareholders and stakeholders of The Reject Shop.”

New opportunities

The Reject Shop chief executive officer Clinton Cahn welcomed the takeover offer.

“We are excited about the new opportunities this transaction presents,” he said.

“There is strong cultural alignment between our teams and we look forward to working alongside the Dollarama team to leverage the expertise of a leading value retailer, accelerate our store network expansion plan and continue helping all Australians save money every day.”

About Dollarama

Founded in 1992, Dollarama offers a broad assortment of discount consumable products, general merchandise and seasonal items through in-store and online channels.

The company has 1,601 stores throughout Canada and owns a 60.1% interest in growing Latin American value retailer Dollarcity.

Dollarcity has 588 stores in Colombia, Guatemala, El Salvador and Peru.

Leading value retailer

Dollarama chief executive officer Neil Rossy said the company had worked hard to identify the right opportunity to expand into new geographies and build on its track record as a leading value retailer.

“With this acquisition, we have a unique and compelling opportunity to bring our differentiated value proposition to a new market which presents a clear path for growth through an established platform,” he said.

“We look forward to embarking on this new chapter of Dollarama’s international growth journey with our local management team and more than 5,000 employees across Australia.”

“Together, we will leverage our core strengths as value retailers with best-in-class merchandising, sourcing and operational expertise.”