Reuters – Esprit Share Slide Sparks Takeover Talks

Shares in Esprit Holdings fell a further 14 percent on Thursday, following the resignation of its chairman and chief executive on successive days, sparking speculation the clothing retailer could become a takeover target, writes Reuters. Banking sources have told Reuters some private equity groups had previously looked at Esprit, and the stock plunge may attract renewed interest.

Reuters – Shares in Esprit Holdings Ltd (0330.HK) fell a further 14 percent on Thursday, following the resignation of its chairman and chief executive on successive days, stoking speculation the clothing retailer could become a takeover target.

The stock has lost up to a third of its market value in two days as the departures raised worries about management stability and the future of a costly turnaround plan at Europe-focused Esprit, which competes with Sweden’s Hennes & Mauritz AB (HMb.ST) and Spain’s Inditex SA (ITX.MC).

“Resignations of the top two executives are not a good sign. The stock is set to face pressure in the immediate run as investors lose faith in the company,” said Francis Lun, managing director at investment firm Lyncean Holdings.

“As the stock falls, it could easily become an acquisition target by rivals or private equity funds.”

Banking sources have told Reuters some private equity groups had previously looked at Esprit, and the stock plunge would likely attract renewed interest.

Hans Joachim Korber resigned on Wednesday evening as chairman of Esprit with immediate effect, just a day after the company said chief executive Ronald van der Vis would step down by July 1, 2013. Raymond Or Ching Fai, a former head of Hong Kong’s Hang Seng Bank (0011.HK) and a non-executive director of Esprit, replaces Korber as chairman.

The fashion group, which generates about 80 percent of its sales in Europe, has launched an HK$18 billion ($2.3 billion) restructuring plan due to be completed by 2015 as it grapples with a slump in demand due to the euro zone debt crisis.

Shares of the company fell as much as 14 percent to HK$9.03 on Thursday, their lowest level since November, compared with a 0.7 percent drop in the benchmark Hang Seng Index .HSI.

The company’s market value is now $1.75 billion, compared with a market value of around $8 billion at the end of 2010.

Standard Chartered downgraded Esprit to underperform, saying the outlook for the company was uncertain, and cut its price target by 50 percent to HK$8.70 from HK$17.50.

Credit Suisse cut Esprit’s target price to HK$8.75 from HK$12.50, saying the sudden departure of the chief executive added uncertainty to the transformation plan.

The latest resignations come after CFO Chew Fook Aun quit for personal reasons in December and was replaced in April by Thomas Tang, a former chief financial officer of blue-chip property developer Sino Land Co Ltd (0083.HK).

The management reshuffle has cast uncertainty over the company’s ability to execute its turnaround plan and revive a brand that Esprit admitted last year had “lost its soul”.

(Reporting By Donny Kwok; Editing by Anne Marie Roantree and Richard Pullin)