Why the City Chic (ASX:CCX) share price crashed 15% lower today

The City Chic Collective Ltd (ASX: CCX) share price crashed lower today following an announcement on its acquisition plans…
The post Why the City Chic (ASX:CCX) share price crashed 15% lower today appeared first on Motley Fool Australia. –

The City Chic Collective Ltd (ASX: CCX) share price has tumbled lower on Thursday after the release of an announcement.

The fashion retailer’s shares are down 7% to $3.14 in afternoon trade but were as much as 15.5% lower in morning trade.

What did City Chic announce?

This morning City Chic provided an update on its plan to acquire the ecommerce assets of US-based plus-size retailer Catherines.

In July, the company undertook a $90 million equity raising. These funds were going to be used partly to support the potential acquisition of the Catherines assets following the bankruptcy of Ascena Retail Group.

At that point, the company was in pole position to complete the acquisition. It was named the stalking horse bidder and signed an asset purchase agreement. A stalking horse bid is essentially a reserve price for an auction.

That was set at US$16 million, though management warned that it was quite likely that the auction would take the final price beyond this.

What happened at the auction?

Well, this morning the company revealed that this was the case. But unfortunately for City Chic and its shareholders, it wasn’t the successful bidder.

According to the release, the assets were eventually sold at the auction for US$40.8 million. Management advised that this was above its assessment of the value of these assets and it didn’t want to overpay for them.

The company’s chief executive officer, Phil Ryan, commented: “Although it was disappointing not to win the assets at auction, we have a very good understanding of the plus size market and the value of the assets, and we did not want to overpay.”

“We have a focused strategy to grow our global digital presence and will execute this strategy through our extensive organic growth program and evaluating any inorganic opportunities on their merits,” he added.

But City Chic won’t let this setback hold it back. It sees plenty of opportunities to deploy its funds on acquisitions in the future.

“Given current market conditions, we continue to see opportunities to add brands to our collective and more aggressively take market share organically. We are well positioned financially and operationally to capitalize on these opportunities to scale globally,” Mr Ryan concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the City Chic (ASX:CCX) share price crashed 15% lower today appeared first on Motley Fool Australia.

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