The Reject Shop Ltd (ASX: TRS) share price has soared 110% in response to agreeing to a takeover deal.
Reject Shop is a retailer that sells branded household essentials at low prices as well as “unique and exciting general merchandise and seasonal products at compelling price points”.
Dollarama agrees deal to buy Reject Shop
Reject Shop announced it has entered into a binding takeover with Dollarama Inc (TSX: DOL) where the Canadian retailer will buy the business at a price of $6.68 cash per share.
This price represents a 112% premium to the closing price of $3.15 on 26 March 2025.
If the takeover is approved and passes the other customary conditions, The Reject Shop’s board intends to declare a special dividend of up to A$0.77 per share, payable before the takeover, which would be deducted from the offer price. This could unlock up to A$0.33 of franking credits per share.
It seems to have a high chance of being accepted by shareholders because The Reject Shop board have unanimously recommended that shareholders vote in favour of the takeover and Reject Shop’s largest shareholder, Kin Group (which owns 20.8% of the ASX share), has said it intends to vote in favour of the deal.
What is Dollarama?
Dollarama is a Canadian value retailer that sells a broad assortment of consumable products, general merchandise and seasonal items both in-store and online, with 1,601 locations in Canada. It’s listed on the Toronto Stock Exchange.
It also owns 60.1% of Dollarcity, a Latin American value retailer that has 588 stores across Colombia, Guatemala, El Salvador and Peru.
Leadership comments
The Reject Shop Chairman, Steven Fisher, said:
Today 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 all-cash Scheme Consideration provides attractive value and certainty for all shareholders. The Board believes the proposed transaction will benefit both shareholders and stakeholders of The Reject Shop and is in line with the Board’s priority to deliver shareholder value.
Final thoughts on the Reject Shop share price
It’s trading at very close to the offer price, so the market seems convinced it’s a done deal. A premium of over 110% is a huge offer. If I were a shareholder, I’d be happy to sell shares and move onto another investment.
