A further decline in the share price of Joules has raised the question of whether a £15 million investment by the retail giant will proceed.
The hopes of the struggling fashion retailer Joules to secure a lifeline from the high street giant Next have encountered a roadblock days after it issued a profit warning.
Three weeks after admitting they were in talks, the two businesses are not close to reaching an agreement on the conditions of investment from Next.
This weekend, city sources said that Next had not received enough financial information to submit a formal proposal to the Joules board.
In addition, there were worries that the clothes retail behemoth would be willing to proceed with an acquisition at 33p per share or higher – the valuation of Joules at the time.
Since then, the company’s stock has continued to decline, finishing Friday at only 25.5 pence.
A representative for Joules issued the following statement on Sunday: “Joules maintains its constructive negotiations with Next plc over adopting its Total Platform services to support its long-term growth ambitions as well as a potential equity investment.
There is no assurance that these conversations will result in an agreement, and more announcements will be made if and when necessary.
According to an insider, trade was still feasible, but time was running short.
Earlier in August, Joules stated that it was seeking an equity investment of approximately £15 million, despite the company’s current market worth of just under £30 million due to a catastrophic decline in its share price.
It further stated that the transaction will occur “at no less than Joules’ current market price.”
One insider stated that Next CEO Lord Wolfson would “absolutely not” agree to pay a premium for a stake in Joules.
It informed the stock market nine days ago that trading in the five weeks since the end of its fiscal year had “materially deteriorated” and that it would report a larger loss than anticipated.
It also announced that Jonathon Brown, a former executive at John Lewis and Kingfisher, will serve as its new chief executive officer.
If a deal is finalized, Joules will become the next retailer to benefit from Next’s financial and operational strength.
In recent years, Next has formed collaborative ventures with labels such as Reiss and Victoria’s Secret, and it recently reached an agreement with hedge fund Davidson Kempner to acquire full control of baby products shop JoJo Maman Bebe.
As inflationary pressures struck the retail industry, Joules, which operates around 130 locations and employs over a thousand people, has suffered difficult times.
It engaged KPMG last month to assist with attempts to increase “profitability, cash creation, and liquidity headroom.”
It later announced that it had agreed to an extension of its banking facilities with its primary lender, Barclays, which would limit its capacity to pay dividends.
EY advises Next in its negotiations with Joules.
Joules has been listed on the London stock exchange since 2016, having been started in Leicestershire in 1989 by Tom Joule, who began selling clothing from a rural show booth.
Mr. Joule is currently the company’s non-executive director.
In October, Joules aims to disclose its annual results.
A transaction with Next would require shareholder approval from Joules.
