Duke Street firms up Esporta bid

Investors have 21 days to consider Duke Street’s hostile 80p per share offer for the health and leisure company

Duke Street Capital has today offered to pay shareholders in leisure group Esporta Plc 80p in cash per share in a bid to acquire the portion of the company’s shares that it doesn’t already own.

Esporta, whose stock is currently trading at just over 80p, has rejected the offer on the grounds that it 'materially' undervalues the company. Michael Ball, the group's finance director, said the offer failed to take into account a recent turnaround in trading performance, a significant increase in new members and a £5m cost savings programme that has been implemented.'

Duke Street’s cash offer values the company at £133m plus debt.

According to Duke Street, the price it has offered constitutes a 57 per cent premium over Esporta’s share price of 51p on 19 October 2001, the day before bid speculation started to drive up the stock.

Duke Street first approached the leisure company in November and started buying shares following Esporta’s issuing a profit warning and bringing in a new CEO. Duke Street has since amassed a large stake of just under 25 per cent in the company. On average, Duke Street paid around 70p per share while building up its interest. 

“We’ve had a very positive response from institutions so far, with many of them having sold a portion of their Esporta shares to us”, said Peter Taylor, a managing director at Duke Street, adding that the choice now facing investors was one between “certain cash today or an uncertain turnaround.”

If successful, Duke Street intends to “retain and rebuild the premium status of the Esporta brand, which we think has come under pressure after the recent discounting and cost-cutting”, said Taylor. Other elements of Duke Street’s plan for the business include formulating a strategy for Europe and injecting the growth capital required for further growth that Esporta would have trouble raising elsewhere, he said.

Esporta listed on the London Stock Exchange two years ago at an issue price of 105p.

Duke Street is being advised by Hawkpoint Partners. Esporta has Lazards by its side.