Naked Stock Up After It Teased New M&A Deal

Naked’s stock has been higher since company CEO and chairman Justin Davis-Rice announced August 20 that the company had reached a tentative agreement to partner with another “substantial” firm and was in the process of due diligence on the deal.

NAKD stock closed at $.50 the day before the announcement on August 20, jumped to close at $.75 on August 26, and closed at $.63 on September 7, as time passed with no further announcements. It did not name the company or industry involved.

For several months Naked had talked about expanding through a merger or acquisition, but instead one of its most recent moves was the divestiture of its 60 brick and mortar stores in Australia and New Zealand.

Meanwhile, during the past several months, one of its more active competitors, Playboy, has completed two big acquisitions: the 41 store Lovers adult store chain in March and the 60 store Honey Birdette lingerie business in August.

In a message to shareholders on August 20, Naked chairman Justin Davis-Rice declared, “We have a strong balance sheet, no debt and an asset-light operating model and we see a very favorable M&A environment around the globe,” adding “I know many of you are eager for an update on the status of our plans to find a merger or acquisition partner. As we have said previously, we believe our strong cash position and tremendous shareholder base are assets that make Naked a highly attractive partner. Whilst many smaller opportunities exist and would seem easier to execute quickly, we have always believed and still strongly believe our attributes afford us the right to be selective seeking to partner with a substantial company, one that is an industry leader, with compelling growth prospects and disruptive technology. Over the past several months, our management has traveled extensively, meeting with companies that potentially meet those criteria. I am delighted to confirm we believe we have found such a company. We have recently reached preliminary agreement on non-binding terms and are now conducting due diligence. The company is in a sector which has been forecast to have strong growth for many decades to come. There is, of course, no guarantee that we will complete the deal, on the preliminary terms we have negotiated, or at all.”

Davis-Rice also pointed out that “the divestiture of the bricks-and-mortar operations of Bendon we have solidified our balance sheet following the completion of multiple strategic capital financings resulting in a net cash position of $270 million after repayment of all previous bank debt.” ­­—NM