Harvey Nichols seen as ripe takeover target

PUBLISHED : Friday, 09 April, 1999, 12:00am
UPDATED : Friday, 09 April, 1999, 12:00am

Takeover speculation swirled around Harvey Nichols yesterday after Dickson Poon's restructuring move.

Shares in the upmarket fashion, retail and restaurant group climbed more than 4 per cent - hitting a new high of 197 pence (about HK$24.37) in early trading - as analysts began factoring in a bid premium to their share-price forecasts for the group.

'It is possible that someone else might bid for Harvey Nichols,' said Isabelle Payet, retail analyst at Sutherlands.

Harvey Nichols is regarded as ripe for takeover given its strong brand, and many bankers believe Mr Poon may be unwilling to take on the group's future funding needs as it seeks to expand.

In addition to the opening of the group's second stand-alone restaurant next month in London's financial district, the group also foresees an estimated GBP60 million of investment from two future store openings, one of which will see the company push into Scotland for the first time, with a new shop in Edinburgh.

Analysts believe Mr Poon will be seeking to free himself from such commitments, particularly at a time when competition in the British retail sector is becoming increasingly fierce.

In the first six months of the year to September 26, Harvey Nichols reported flat profits and warned full-year earnings would see a drop in performance.

Harvey Nichols presents an additionally attractive target, given the drive by many retailers to consolidate their activities.

French luxury-goods giant LVMH Moet Hennessy Louis Vuitton is seen as being a potential bidder for either Harvey Nichols or ST Dupont, the French luxury accessories group, whose control has also passed to Mr Poon.

Analysts said yesterday's announcement by Mr Poon had suddenly focused the minds of many investors on Harvey Nichols.

'It's a stock that has been ignored,' said Matthew Siebert, retail analyst at ABN Amro.

'If anything, this has focused a lot of people to look at it and thank God it's cheap.' A spokesman for Harvey Nichols said the company believed the shift in shareholdings had no implications for the group.

'We have always had an excellent arms-length relationship with Dickson Poon and that has not changed,' the spokesman said.

In contrast to the sharp share price rise of Harvey Nichols, shares in ST Dupont were falling yesterday on the news that Mr Poon was taking control of Dickson Concepts' 56.6 per cent stake in Dupont.

The stock dropped almost 6 per cent in early trading as analysts said plans for a convertible-bond issue to fund an estimated 80 million to 90 million french franc (about HK$101.91 million to $114.65 million) recapitalisation of the company was weighing on investor sentiment.

'It means that the stock will be even further diluted once this instrument comes on to the market,' said one analyst.

ST Dupont chairman William Christie said the new issue was 'still under study', but analysts said a convertible bond was the only option for the cash-strapped group.

In its last set of results, ST Dupont reported revenue was down 15.2 per cent and said a restructuring programme, which saw 140 job losses and a reorganisation of its sales force, was under way.

Analysts expect earnings to fall even further as the full fall-out of ST Dupont's exposure to Asia is felt.

Asia accounts for 41.5 per cent of sales, with 29.9 per cent in France, 23.6 per cent in the rest of Europe and 4.9 per cent in the Americas.

Mr Christie said French regulations barred him from talking about the strategy of the company, but insisted its relationship with Dickson Concepts was unchanged.