Carpetright shareholder Meditor mulling 5p a share bid

Carpetright shares tanked on Thursday after the struggling floor covering retailer said it is in talks with biggest shareholder Meditor about a possible takeover offer at a heavy discount.

Meditor has indicated that it would be prepared to pay 5p per share, which is well below Carpetright's closing share price of 9.12p on Wednesday, valuing it at approximately £15.2m.

The company said it needs around £80m to repay its debt facilities, meet ongoing working capital requirements and provide the group with the necessary growth capital to execute its strategy.

Having "actively" explored a number of long-term financing solutions including standard high street refinancing, asset-backed lending, strategic asset sales and equity financing, it is now in talks with Meditor about a possible offer.

The company said investors representing around 24% of its share capital have already agreed to accept if a formal bid is made.

Carpetright chairman Bob Ivell said: "Shareholders will be aware that we have been engaged in comprehensive refinancing discussions to replace existing facilities which expire at the end of this calendar year.

"The possible offer being announced today would put in place a new financing structure for Carpetright which would enable us to continue our recovery and make necessary investments in improving our business."

If a formal bid is made, Meditor will convert the majority of Carpetright's outstanding debt into equity and provide the company with additional capital.

Carpetright also gave a brief update on trading, saying it was performing well despite "the challenging economic backdrop and intense sector competition".

At 1010 GMT, the shares were down 46% at 4.92p.

Shore Capital analysts Greg Lawless and Clive Black said: "Overall we are minded that investors should accept the possible offer by Meditor. Given that the largest institutional shareholders look to have already bought in to the proposed deal it may represent a bird in the hand for other shareholders and will bring to an end a troubled period for the company.

"We note that the timing of the refinancing and repayment dates has probably influenced the possible offer by Meditor but note that trading in the first half looks to have improved. Away from the glare of the public markets the company can complete its restructuring to improve the business performance and secure its future."