KMD Brands (ASX:KMD) has rejected a non-binding transaction concept from US-based surfwear company Stokehouse Unlimited, labelling the proposal as detrimental to shareholder value.
The concept, which surfaced following media speculation, involved de-merging the iconic Rip Curl brand into a separate entity listed on the NZX and ASX, subsequently merging it with Stokehouse.
Under the proposed terms, Stokehouse shareholders would have secured a 22% stake in the new entity, with Stokehouse CEO Paul Naude leading the combined business from California.
The KMD Brands board, led by Chairman David Kirk, determined the deal was "misaligned" with the actual earnings contributions of the respective businesses.
The board highlighted that Stokehouse brings limited scale, significant relative debt, and an "immaterial" contribution to combined EBITDA.
Furthermore, the board argued the deal would unfairly dilute existing KMD shareholders without introducing new capital, instead relying on a large capital raising by the smaller de-merged entity.
David Kirk concluded that the proposal lacked a clear path to enhance value and presented substantial execution challenges, ultimately failing to serve the best interests of the Group’s shareholders.