Founders of Germany's Douglas in $2 billion buyout bid

FRANKFURT Mon Oct 15, 2012 10:43am EDT

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FRANKFURT (Reuters) - The founding family of Douglas Holding AG DOHG.DE has teamed up with private equity to bid for the loss-making retailer, offering a possible end to months of uncertainty over its ownership as it battles fierce competition from online players.

Under a deal announced on Monday valuing the German perfume-to-books retailer at 1.5 billion euros ($2 billion), the Kreke family gains more control over the group as it carries out a restructuring of its under-pressure books business Thalia.

The Kreke family, which said back in January it aimed to take Douglas private with the help of financial investors, said a deal had been agreed with Advent and was already backed by major shareholders.

Douglas said it will make a statement on the bid once the full takeover offer has been published.

For Advent, the deal continues its recent track record of dealmaking which has made it one of the most active buyout groups in Europe since the credit crisis, with deals from financial services to retail.

The firm, which is among those circling Dutch asset manager Robeco, also sealed a deal to buy Danish software and services group KMD for an undisclosed sum from rival EQT and pension fund ATP, after the sellers initially baulked at offers well below their 700 million euro asking price.

The 38 euros per share offer for Douglas represents a 9.2 percent premium to Friday's closing price and, according to Advent and the Kreke family, is almost 42 percent above the four-week volume-weighed average share price of Douglas prior to the emergence of takeover rumors in January.

Douglas shares were trading 8.1 percent higher at 37.615 euros by 1439 GMT.

The takeover offer is being made by an investment vehicle of which Advent owns 80 percent and the Kreke family 20 percent, and would be the second-largest private equity-backed deal in Germany this year, after bandages maker BSN Medical was bought by Sweden's EQT.

"We want to jointly continue the success story of Douglas in the way that it has been so far," said Douglas Chief Executive Henning Kreke, speaking on behalf of the family, indicating there were no plans for major disposals following the acquisition.

FAMILY CHAIN

The bidders said they had already secured commitments from shareholders representing just over half of Douglas shares, but the offer is conditional on reaching a threshold of 75 percent.

Joern Kreke, Douglas's 71-year-old chairman, turned his family's chain of confectioners into a diversified retail company that now has almost 2,000 outlets across Europe.

Hagen, Germany-based Douglas has five main business lines: perfume and cosmetics store chain Douglas, bookstore chain Thalia, jewellery seller Christ, clothing shops AppelrathCuepper and confectionery shop chain Hussel.

But Thalia has seen growing competition from online retailers such as Amazon.Com Inc (AMZN.O), and measures to restructure the chain helped cause a group net loss of 73 million euros ($94.7 million) in the first nine months of the financial year.

Kreke said his family and Advent fully supported the restructuring strategy of Thalia's management and said he aimed to continue driving the expansion of Douglas's profitable perfume and jewellery businesses.

While Advent said the goal was not to delist Douglas entirely, Kreke has said he hoped less exposure to the demands of equity investors would make it easier for management to focus on turning round the business.

Kreke also said the joint bid would help to ease "disquiet" among Douglas shareholders.

Drugstore owner Erwin Mueller created tension among shareholders last year by raising his stake above 10 percent without commenting on his intentions.

Mueller has now agreed to tender his stake of almost 11 percent, as has family-owned food and shipping conglomerate Oetker, which owns about 26 percent of Douglas.

The remaining shares making up the 50.5 percent committed so far are held by the Kreke family - which would see its holding rise to 20 percent from 12.7 percent now in a full takeover - and by funds advised by Advent. The only other major shareholder of Douglas is Bank Sarasin with 11.4 percent.

Advent and the Kreke family aim to complete the takeover by the end of the year.

($1 = 0.7712 euros)

(Additional reporting by Simon Meads in London; Editing by Mike Nesbit and David Holmes)

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