Country Road hits hurdle

Solomon Lew's Australian Retail Investments (ARI) has threatened court action against fashion chain retailer Country Road over issues regarding a capital raising for $92 million of the acquisition of the Witchery Group.

As previously reported on ragtrader,com.au, Country Road moved to acquire Witchery Group on August 1 this year, including a renounceable rights issue to raise up to $92 million of new equity.

However, Country Road has since received correspondence from private investment vehicle ARI, which is an 11.84 percent shareholder of Country Road, indicating that it intends to commence proceedings against the brand in relation to the rights issue.

ARI raised a number of concerns with Country Road, including that they are not able to objectively assess whether or not to participate in the rights issue based on the information disclosed by Country Road in relation to the Witchery acquisition and the rights issue.

Country Road denied this statement and said it considered that “all information material to investors’ participation in the rights issue has been disclosed in the offer booklet lodged with the Australian Securities Exchange on August 1 2012 (offer booklet)”.

The initial correspondence from ARI also announced the company's intention to seek a permanent injunction to prevent dispatch of the offer booklet if Country Road did not provide confirmation that it would withhold the dispatch of the offer booklet until supplementary and corrective disclosure had been made to ARI’s satisfaction.

It also made reference to other potential actions including seeking access to the documents of Country Road.

In a statement to market, Country Road revealed it had subsequently provided a response to ARI seeking to address their specific concerns and questions, however, despite this, the brand recently received further correspondence from ARI indicating that that they intend to commence proceedings against Country Road.

In response to the legal threat from ARI, Country Road said it “considers ARI’s concerns to be baseless and will vigorously defend any attempt to frustrate the Witchery acquisition in the courts”.

The brand added that it believes that the Witchery acquisition is highly attractive for Country Road and that the structure of the rights issue ensures that there is an equal opportunity for all shareholders to participate in the equity raising.

Accordingly Country Road at this stage sees no reason to depart from the announced timetable for the rights issue, including the expected dispatch of the offer booklet on August 15 2012.

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