Dollarama has pitched a $259m takeover for Reject Shop

The Reject Shop is set to fall into Canadian hands after agreeing to a $259m takeover bid from bargain chain Dollarama.

The Reject Shop in Highpoint, Maribyrnong.

Australian retailer The Reject Shop, which has been selling no-frills lollies and homeware products since 1981, is set to fall into Canadian hands after agreeing to a $259m takeover bid by Montreal-based bargain chain Dollarama.

The Reject Shop’s board has unanimously backed a takeover bid pitched at $6.88 a share, more than double the last closing price for the ASX-listed retailer, and has entered into a binding scheme implementation agreement for the deal.

The company’s largest shareholder, packaging millionaire Raphael Geminder who has just over 20 per cent of the group, has also communicated its intention to accept the bid.

It ends a rocky ride for Mr Geminder on The Reject Shop share register after he first made his own takeover bid for The Reject Shop in 2018 which was priced at $2.70 per share or $78m for the company. His takeover bid stalled, and he was left with a 20.8 per cent stake, with The Reject Shop share price rising to almost $7 but then sliding closer to $3 as the retailer issued profit warnings and retreating sales.

Raphael Geminder is The Reject Shop’s largest shareholder. Picture: Stuart McEvoy

Mr Geminder, who also controls a packaging empire and listed packaging company Pact, will make a tidy profit on his seven-year investment in The Reject Shop, however. Married to the daughter of the late billionaire Richard Pratt, Mr Geminder was rated as Australia’s 154th richest individual in The Australian’s 250 Rich List with a net worth of $1.09bn.

The scheme consideration of $6.68 cash per share values The Reject Shop’s equity at approximately $259m and represents a premium of 112 per cent to the closing share price on Wednesday of $3.15 per share. If the takeover is approved by shareholders, The Reject Shop board intends to determine a fully franked special dividend of up to 77c per share payable prior to implementation of the takeover scheme.

The Reject Shop chairman, Steven Fisher, said the takeover marks a milestone in the journey of The Reject Shop.

“Attracting an offer from Dollarama, a recognised leader in the value retail market, is testament to both the meaningful improvement that our incredible team has made to our business over the past few years as well as the significant growth potential that exists for The Reject Shop.”

The Reject Shop chief executive Clinton Cahn said there was strong cultural alignment between the teams. “We look forward to working alongside the Dollarama team to leverage the expertise of a leading value retailer, accelerate our store network expansion plan, and continue helping all Australians save money every day.”

It will also mark the end of almost 50 years of Australian ownership of The Reject Shop if it falls into Canadian hands.

Dollarama, which is based in Montreal and has more than 1,600 stores through Canada as well as a joint venture in Latin America, will now add The Reject Shop and its portfolio of 390 stores to its bulging portfolio and if the takeover is successful has plans to grow its local footprint to 700 stores.

Founded in 1992 and headquartered in Montreal, Quebec, Canada, Dollarama is a leading Canadian value retailer offering a broad assortment of consumable products, general merchandise and seasonal items both in-store and online. Dollarama is listed on the Toronto Stock Exchange and currently has 1,601 locations located throughout Canada and also owns a 60.1 per cent interest in Dollarcity, a growing Latin American value retailer that has 588 stores located in Colombia, Guatemala, El Salvador and Peru.

“Identifying the right opportunity to expand into new geographies and build on our track record as a leading value retailer in Canada and Latin America has been a key objective for the Dollarama team,” said Neil Rossy, president and CEO of Dollarama.

“With this acquisition, we have a unique and compelling opportunity to bring our differentiated value proposition to a new market which presents a clear path for growth through an established platform.”