Superdry plc: Posting of Circular and Notice of General Meeting

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

NOTHING IN THIS ANNOUNCEMENT SHALL CONSTITUTE OR FORM A PART OF ANY OFFER, INVITATION OR RECOMMENDATION TO PURCHASE, SELL OR SUBSCRIBE FOR ANY SECURITIES IN ANY JURISDICTION.  NOTHING IN THIS ANNOUNCEMENT SHOULD BE INTERPRETED AS A TERM OR CONDITION OF THE EQUITY RAISE.  NOTHING CONTAINED IN THIS ANNOUNCEMENT SHALL FORM THE BASIS OF, OR BE RELIED UPON IN CONNECTION WITH, OR ACT AS AN INDUCEMENT TO ENTER INTO, ANY INVESTMENT ACTIVITY. ANY DECISION TO PURCHASE, SUBSCRIBE FOR OR OTHERWISE ACQUIRE, OR TO SELL OR OTHERWISE DISPOSE OF, ANY SECURITIES MENTIONED IN THIS ANNOUNCEMENT MUST BE MADE ONLY ON THE BASIS OF THE INFORMATION CONTAINED IN AND INCORPORATED BY REFERENCE INTO THE CIRCULAR. PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.

Unless otherwise stated, defined terms used in this announcement have the meanings given to them in the Circular published by the Company today.

21 May 2024

Superdry plc

(“Superdry” or the “Company”)

Posting of Circular and Notice of General Meeting

Further to the Company’s announcement on 16 April 2024, Superdry announces today that the shareholder circular (the “Circular”) providing further details of the proposed Equity Raise (either in the form of the Open Offer or the Placing) and Delisting and a notice of General Meeting has been published today, having been approved by the Financial Conduct Authority (“FCA”). The Circular will be sent to the Company’s Shareholders (other than those who have elected for website notification only) shortly. Details in respect of the Restructuring Plan have separately been made available to impacted creditors.

Together, the Restructuring Plan, the Equity Raise and the Delisting (together, the “Capital and Restructuring Measures”) constitute a key package of measures that are needed to avoid the Company entering into insolvency, allow Superdry to return to a more stable footing, accelerate its turnaround plan and drive it towards a viable and sustainable future. Therefore, each element of this package will be inter-conditional upon the others, such that the package as a whole requires each of the Restructuring Plan, the Equity Raise and the Delisting to be approved.

The Circular contains a notice of a General Meeting to be held at Unit 60 The Runnings, Cheltenham, Gloucestershire, GL51 9NW on 14 June 2024 at 9.00 a.m., at which Shareholders will be asked to approve the Equity Raise, the Delisting, certain articles and share capital changes and the Rule 9 Waiver and Related Party Transaction (collectively the “Resolutions”) in relation to Mr. Julian Dunkerton’s (Chief Executive Officer, co-founder and largest Superdry Shareholder) participation in the Equity Raise.

The Board considers that the Capital and Restructuring Measures and the passing of each of the Resolutions are in the best interests of Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of all the Resolutions to be proposed at the General Meeting.

If Shareholders approve neither all of the Open Offer Resolutions and the Delisting Resolution nor all of the Placing Resolutions and the Delisting Resolution, the Capital and Restructuring Measures will not proceed, with the following consequences:

• the Group will be unable to fund its short-term working capital needs; and
• the Directors believe that, in such circumstances, the Plan Company, the Company and certain other companies in the Group will need to enter into administration or an equivalent insolvency process immediately. Such a process is highly likely to result in the loss by Shareholders of all of their investment in the Company.

The Board recommends that Shareholders vote in favour of both the Open Offer Resolutions and the Placing Resolutions (in addition to the Delisting Resolution) even if they have a strong preference for one option over the other as, if there is a split in voting among Shareholders, that could result in neither the Open Offer Resolutions nor the Placing Resolutions passing, with the consequences set out above.

Mr. Dunkerton, who held approximately 26.34 per cent. of the Company’s issued share capital as at the Latest Practicable Date, has irrevocably undertaken to vote in favour of all of the Resolutions (other than the Rule 9 Waiver Resolutions and the Related Party Transaction Resolution, on which he is not entitled to vote and which must be approved by independent shareholders).

The Independent Directors, who in aggregate held approximately 0.23 per cent. of the Company’s issued share capital as at the Latest Practicable Date, have irrevocably undertaken to vote in favour of all of the Resolutions.

Enquiries

Background to, and reasons for, the Capital and Restructuring Measures

Superdry previously announced that it has been exploring various material cost saving options as part of a broader turnaround plan that positions the Company for long-term success.

On 16 April 2024, in support of that objective, the Company announced that C-Retail Limited (the “Plan Company”), a wholly-owned subsidiary of the Company which owns the leasehold portfolio of the Group from which its UK store retail business trades, is launching the Restructuring Plan, which will principally involve a restructuring of its UK property estate and retail cost base. The Restructuring Plan is a key element of the Company’s turnaround plan that is intended to help the Company deliver its financially sustainable operating model.

The Company believes that, unless the Restructuring Plan comes into effect, it will need to enter into administration or an equivalent insolvency process immediately. This outcome would leave creditors, including the creditors whose claims would otherwise be compromised by the Restructuring Plan, materially worse off than they would be under the Restructuring Plan.

The Restructuring Plan is an important element of the Company’s efforts to overhaul its operations to make them financially sustainable. The Company’s efforts also incorporate other measures including, among others:

• returning the underlying retail channel to positive like-for-like revenue growth through internal initiatives with improved, targeted, customer-focused product ranges that demonstrate clear value to the customer and a reallocation of marketing spend that focuses on targeted content through relevant channels;
• a data-led approach to range construction; testing new product ranges on the improved e-commerce platform which will provide enhanced analysis of product performance;
• a separate design team focused on short lead time product, identifying trends in real time;
• a continued focus on store environment, with a new disciplined approach to store densities and option fill;
• an improvement in gross margins derived through initiatives such as a refreshed pricing strategy that demonstrates value at full price, removing prolonged promotional windows that erode the Brand; and
• a more efficient and focused operating cost base appropriate for the Group’s target revenue base, benefitting from initiatives including the Delisting and cross-functional process improvements.

The restructuring efforts are designed to deliver a viable and sustainable future for the Company, whereby rightsizing the cost base provides a platform for future growth. In the UK, the Company will focus on its core profitable store estate alongside a refreshed e-commerce approach that delivers a more personalised, customer centric experience, with a product portfolio that emphasises fresh, new designs under a ‘buy now – wear now’ approach; moving away from traditionally segmented seasonal ranges that prove to be commercially challenging. The Company intends to implement a pricing strategy that moves away from being ‘discount led’ to help deliver improved margins. Internationally, the Company intends to significantly reduce its cost-onerous store footprint over the next three years, whilst adopting an e-commerce trading strategy similar to the one it will implement in the UK to help grow internationally in this channel. The Company also intends to devise and deploy a ‘Go to Market’ strategy by territory that ensures the right blend of profitable sales channels are deployed by market, leveraging ‘expert in-market’ partnering arrangements. This will result in a simplified wholesale business that focusses on key partners of scale that can deliver cost-effective routes to market.

In implementing these measures, the Company expects among others:

• the closure of certain stores in the United Kingdom as a consequence of the implementation of the Restructuring Plan, namely the possible termination of certain leases by landlords, as well as the reduction in the number of personnel associated with these store closures;
• the reduction in number of administrative and other personnel as a result of the Delisting as well as the streamlining of management functions and reporting lines;
• internationally, the reduction of its cost-onerous store footprint over the next 24 to 36 months, including approximately 25 to 30 European-based stores already identified for closure over the next 12 months (including a small number which have already closed) and a detailed review of its international footprint to identify additional stores for closure, or a sale of stores to franchisees or other third parties, coupled with headcount reduction associated with these store closures or dispositions;
• the implementation of a new third party e-commerce platform to replace its existing proprietary system, which will enable a revitalised and more efficient e-commerce strategy in the UK and internationally; and
• the pursuit of potential deals relating to its Brand and intellectual property in non-core countries, principally to raise additional capital to address its working capital needs.

On a medium-to-long term view, whilst recognising that there is a complex pathway in the interim to navigate in order to deliver this, the Company is targeting Group revenue of between £350 million and £400 million, a gross margin slightly ahead of current levels, and mid to high-single digit EBITDA margin (on a pre-IFRS 16 basis).

The Company continues to face challenging trading conditions and, as announced on 29 March 2024, recently extended and increased its secondary lending facilities with Hilco to provide improved liquidity headroom as it implements its turnaround plan. To further bolster that liquidity and provide the Company with the appropriate degree of funding certainty to enter into the Restructuring Plan, the Company has announced the Equity Raise (which is fully supported and underwritten by Mr. Dunkerton).

In preparing for the Equity Raise, which the Board believes is necessary for the continued solvency of the Group, the Board has endeavoured to achieve an outcome which is in the best interests of all Shareholders and provides the greatest certainty of funds for the Company. The Independent Directors have engaged extensively with Mr. Dunkerton, as they believe that his support for the Equity Raise is crucial in order to achieve the necessary certainty of funds and to pass the Resolutions. Mr. Dunkerton has been clear with the rest of the Board throughout the process that he remains deeply committed to Superdry and is highly supportive of the refreshed strategy and the Capital and Restructuring Measures.

Superdry has also been exploring raising funds through further potential deals relating to its Brand and intellectual property in non-core territories. However, discussions in relation to such deals are at an early stage and Superdry does not have any firm indication of expected deal value or timetable (and therefore effect on liquidity). As such, the Board considers it unlikely that any such deals could be negotiated and completed in the requisite timeframes.

Given the material changes to the Company’s business envisioned by the measures described above the Company considers it best to implement these changes away from the heightened exposure of public markets. In addition, the Company believes that it can achieve significant annual cost savings from the Delisting that will contribute to delivering its operating model.

Interaction between Restructuring Plan, the Equity Raise and the Delisting

Each of the Restructuring Plan, Equity Raise and Delisting is inter-conditional upon the others, such that the package as a whole requires each of the Restructuring Plan, Equity Raise and Delisting to be approved. Should these measures therefore not be approved and complete in the timeframe as anticipated, the Directors believe that the Plan Company, the Company and certain other companies in the Group will need to enter into administration or an equivalent insolvency process immediately. Such a process is highly likely to result in the loss by Shareholders of all of their investment in the Company.

If Shareholders approve either all of the Open Offer Resolutions and the Delisting Resolution or all of the Placing Resolutions and the Delisting Resolution (or if Shareholders approve all of the Open Offer Resolutions, all of the Placing Resolutions and the Delisting Resolution and the Board has determined which of the Open Offer or the Placing to implement), and if the Group’s creditors approve the Restructuring Plan, the Company will apply to the Court for the sanctioning of the Restructuring Plan pursuant to section 901F of the Companies Act. 

Following the sanctioning of the Restructuring Plan by the Court, the Company will take the steps necessary for the Restructuring Plan to become effective in accordance with its terms.

Shareholders should note that if any of the above steps do not occur (in particular, if Shareholders do not approve either all of the Open Offer Resolutions and the Delisting Resolution or all of the Placing Resolutions and the Delisting Resolution), the Restructuring Plan will not become effective and the Directors believe that, in such circumstances, the Plan Company, the Company and certain other companies in the Group will need to enter into administration or an equivalent insolvency process immediately. Such a process is highly likely to result in the loss by Shareholders of all of their investment in the Company.

Summary of the Restructuring Plan

The Restructuring Plan will principally involve and facilitate the compromise and amendment of the Plan Company’s UK leasehold obligations to reduce losses and property-related (including rent) liabilities. The Restructuring Plan will also involve the compromise of the Plan Company’s business rates liabilities owed to local authorities and amendments to the Group’s debt facility agreements with BB Funding (GBP) S.à r.l. (“Bantry Bay”) and HUK 128 Limited (“Hilco”).

A restructuring plan is a formal procedure under Part 26A of the Companies Act 2006 for a company in financial difficulties, that are affecting its ability to carry on as a going concern, to agree with its creditors a compromise or arrangement in respect of its debts owed to those creditors.

On 28 March 2024, the Group’s debt facility agreement with Hilco was amended to provide for two incremental facilities for an aggregate amount of £20 million, including a seasonal incremental facility of up to £10 million (the “Seasonal Hilco Incremental Facility”). This seasonal facility is conditional upon Hilco being satisfied that sufficient progress has been made by the Plan Company in relation to the implementation of cost saving measures, including the Restructuring Plan (the “Seasonal Hilco Drawdown Condition”).

The Restructuring Plan, once completed, is expected to result in:

• rent reductions on 39 UK sites;
• the extension of the maturity date of loans made under the Group’s debt facility agreements with Bantry Bay and Hilco;
• confirmation from Hilco that the Seasonal Hilco Drawdown Condition to making the seasonal incremental facility described above have been satisfied; and
• material cash savings from rent and business rates compromises over the three-year period of the Restructuring Plan.

The Company, however, does expect that its UK retail footprint will be reduced as a result of landlords terminating certain leases under which the Group, following the implementation of the Restructuring Plan, is no longer required to pay rent or is able to pay significantly reduced rent.

The Restructuring Plan is conditional on the Company receiving the proceeds of the Equity Raise to help ensure that the Company has the necessary liquidity headroom to deliver its turnaround plan. The Company has consulted with Bantry Bay and Hilco, who have consented to the launch of the Restructuring Plan and remain supportive of the Company.

The launch of the Restructuring Plan is not expected to affect the ordinary course operations of Superdry and in particular:

• the Group’s suppliers, employees and landlords of sites outside of the UK will not be affected. Separately, the Company does expect to separately reduce in its international store footprint, together with headcount reduction associated with such store closures or dispositions; and
• except for the creditors compromised by the Restructuring Plan (which principally comprise landlords of UK sites, rating authorities, Bantry Bay and Hilco), no other creditors’ claims (including suppliers to the Group) will be affected.

The process to implement the Restructuring Plan is expected to complete in June 2024 with the sanction hearing for the Restructuring Plan expected to be held on 17 and 18 June 2024.

Equity Raise

As set out in the Company’s announcement on 16 April 2024, the Equity Raise will comprise either an Open Offer raising gross proceeds of £6,864,595.85 or a Placing raising gross proceeds of £10,000,000. The Company will implement only one of the Open Offer or Placing, but not both (even if all of the Resolutions are passed by Shareholders).

If all of the Resolutions are passed, the Board will, in consultation with the Sponsor and Mr. Dunkerton, determine, by way of Board resolution, which of the Open Offer or the Placing to implement (having due regard to their statutory and fiduciary duties as Directors) and an announcement of that determination will be made through an RIS. Such announcement is expected to be made at the same time as the announcement of the results of the General Meeting. In making such determination, the factors that the Board will take into account include the level of support for the relevant Resolutions, Qualifying Shareholder participation in the Open Offer and the Company’s need for capital.

The Open Offer would comprise the issue of 686,459,585 New Open Offer Shares at £0.01 each (the “Open Offer Issue Price”) and be open to Qualifying Shareholders, whilst the Placing would comprise the issue of 200,000,000 New Placing Shares at £0.05 each (the “Placing Issue Price”) exclusively to Mr. Dunkerton. The Open Offer Issue Price represents a discount of 87.5 per cent. to the Closing Price. The Placing Issue Price represents a discount of 37.5 per cent. to the Closing Price.

Under the Open Offer, Qualifying Shareholders have the opportunity to subscribe for New Open Offer Shares at the Open Offer Issue Price, payable in full on application and free of expenses, pro rata to their existing shareholdings, on the following basis:

6.92146705 New Open Offer Shares for every one Existing Ordinary Share

held by them and registered in their names at the Record Date. Fractions of Ordinary Shares will not be allotted and issued and each Qualifying Shareholder’s entitlement under the Open Offer will be rounded down to the nearest whole number. Fractional entitlements to New Open Offer Shares will be rounded down to the nearest number of New Open Offer Shares.

If the Company implements the Open Offer, Mr. Dunkerton has, subject to certain conditions, irrevocably agreed to subscribe for all of the New Open Offer Shares (subject to clawback to satisfy valid applications made by Qualifying Shareholders under the Open Offer). Therefore, all New Open Offer Shares not taken up by Qualifying Shareholders under the Open Offer will be taken up by Mr. Dunkerton.

If the Company implements the Placing, Mr. Dunkerton has, subject to certain conditions, irrevocably agreed to subscribe for all of the New Placing Shares.

Each of the Open Offer and the Placing are conditional on, inter alia, the Restructuring Plan having been sanctioned by the Court, the passing of the relevant Resolutions (in each case without amendment) and the Delisting having occurred.

Upon completion of the Open Offer, the Company’s Enlarged Share Capital would comprise approximately 785,637,921 New Ordinary Shares, each carrying voting rights. Alternatively, upon completion of the Placing, the Company’s Enlarged Share Capital would comprise approximately 299,178,336 Ordinary Shares, each carrying voting rights.

Further information on the Placing and Open Offer and the terms and conditions on which they are made (as applicable), including the procedure for application and payment relating to the Open Offer, are set out in the Circular.

Use of proceeds of the Equity Raise

On completion of the Equity Raise, the Company expects to receive gross proceeds of £6,864,595.85 (in the case of the Open Offer) or £10,000,000 (in the case of the Placing).

The net proceeds from the Equity Raise, which are expected to be £4,914,595.85 in the case of the Open Offer or £8,050,000 in the case of the Placing, will be used for general working capital purposes.

Delisting

Pursuant to the Delisting, the Company is seeking the proposed cancellation of the listing of the Company’s Existing Ordinary Shares on the premium listing segment of the Official List and their trading on the London Stock Exchange’s Main Market.

As a condition to either the Open Offer or the Placing (as the case may be) completing, the Delisting must have occurred. Furthermore, the Company will not be making an application for Admission in respect of either the New Open Offer Shares (which would be issued if the Open Offer completes) or the New Placing Shares (which would be issued if the Placing completes).  As a result, any New Open Offer Shares or New Placing Shares issued by the Company will be issued at a time when the Company’s shares are no longer publicly traded, which may affect the ability of certain Shareholders to continue holding their shares in the Company.

Shareholder protections following the Delisting

Following Delisting, the following key Shareholder protections will apply:

• the Board commits itself to keep Shareholders informed by updating the Company website with audited annual results and, for at least the first 12 months following the Delisting, consolidated unaudited half yearly results and otherwise by complying with the reporting framework under the Companies Act;
• the Board currently intends to continue to maintain the Company’s status as a public company following Delisting, which will afford Shareholders greater protections following the Delisting than if the Board proposed to re-register the Company as a private company;
• following the Delisting, Shareholders will continue to be afforded the protections of the Takeover Code; and
• to facilitate future Shareholder transactions in the Company’s Ordinary Shares (or New Ordinary Shares, if applicable), the Company has appointed JP Jenkins to provide a matched bargain facility, which will be available upon the date of Delisting.

Further details are set out in the Circular.

Corporate Governance

Following the Delisting, the Company will no longer be subject to the Financial Reporting Council’s UK Corporate Governance Code.

The current Non-Executive Directors propose to resign upon the Delisting. However, it is proposed that changes to the Board will be made such that, as soon as reasonably practicable following Delisting and, in any event, within three months of Delisting, the Board will comprise Mr. Dunkerton as Chief Executive Officer, a Chief Financial Officer with relevant experience (including turnaround situations), an independent chair and two further independent non-executive directors. Between the independent directors and the chair, at least one will have retail and brand expertise and another will have relevant and recent financial experience.

Working capital

While, taking into account the effect of and the net proceeds from the Capital and Restructuring Measures and the bank facilities available to the Group, in the opinion of the Company, on the basis of a reasonable worst-case scenario, the working capital available to the Group is not sufficient for the Group’s present requirements, that is for at least the next 12 months from the date of the Circular, the Directors consider there are actions available to them to seek to mitigate the liquidity shortfall. In light of, and subject to, those mitigating actions, the Directors have a reasonable expectation that the Group will have sufficient working capital for at least the next 12 months. Further details are set out in the Circular.

Other matters

The Equity Raise and Mr. Dunkerton’s participation in it will require Shareholders to consider and, if thought fit, approve a number of other matters, including approving Mr. Dunkerton’s participation in the Equity Raise for the purposes of Rule 9 of the Takeover Code and (in respect of the Placing only) Chapter 11 of the Listing Rules.

Rule 9 Waiver

Mr. Dunkerton and persons acting in concert with him were, in aggregate, interested in 26,160,378 Existing Ordinary Shares, representing approximately 26.4 per cent. of the Company’s issued share capital, as at the Latest Practicable Date.

As a result of his participation in the Open Offer or the Placing (as applicable), the aggregate interest of Mr. Dunkerton and his Concert Party in the Company’s voting rights could increase to approximately 90.7 per cent. (in the case of the Open Offer if none of the other Qualifying Shareholders participate in the Open Offer) or to approximately 75.8 per cent. (in the case of the Placing), based on certain assumptions set out in the Circular. Those assumptions include, among others, that: (i) in relation to the Open Offer, Mr. Dunkerton subscribes for 686,459,585 New Open Offer Shares; and (ii) in relation to the Placing, Mr. Dunkerton subscribes for 200,000,000 New Placing Shares.

Ordinarily, under Rule 9 of the Takeover Code, this would result in Mr. Dunkerton being obliged to make a mandatory offer to acquire all of the issued Ordinary Shares not already owned by him and any persons acting in concert with him in cash. However, the Takeover Panel has agreed to waive this obligation, subject to approval by the Independent Rule 9 Shareholders of the relevant Rule 9 Waiver Resolution on a poll (the “Rule 9 Waiver”).  Accordingly, the Rule 9 Waiver Resolutions will be proposed at the General Meeting.  As required by the Takeover Code, Mr. Dunkerton will not vote on the Rule 9 Waiver Resolutions and he has undertaken to procure that any persons acting in concert with him will not vote on the Rule 9 Waiver Resolutions.

If Qualifying Shareholders (including Mr. Dunkerton) take up 75 per cent. of their Open Offer Entitlement, Mr. Dunkerton and persons acting in concert with him would, in aggregate, be interested in 334,131,357 New Ordinary Shares representing approximately 42.5 per cent. of the voting rights of the Enlarged Share Capital based on the assumptions set out above (other than as to the number of New Open Offer Shares for which Mr. Dunkerton will subscribe).

If all Qualifying Shareholders (including Mr. Dunkerton) take up all of their Open Offer Entitlements (based on the assumptions set out above (other than as to the number of New Open Offer Shares for which Mr Dunkerton will subscribe)), Mr. Dunkerton and persons acting in concert with him would, in aggregate, be interested in 207,783,509 New Ordinary Shares representing approximately 26.4 per cent. of the voting rights of the Enlarged Share Capital.

If the Open Offer or the Placing (as applicable) completes, and if the Restructuring Plan becomes effective in accordance with its terms:

• Mr. Dunkerton and persons acting in concert with him will hold shares carrying 90.7 per cent. (in the case of the Open Offer assuming none of the other Qualifying Shareholders take up their Open Offer Entitlement) or 75.8 per cent. (in the case of the Placing) of the voting rights of the Company (in each case, based on certain assumptions set out above); and

• (for so long as they continue to be acting in concert) Mr. Dunkerton and persons acting in concert with him will accordingly increase their aggregate interests in shares in the Company without incurring any obligation to make an offer under Rule 9 of the Takeover Code. 

This means that, in those circumstances, the Company would be controlled by Mr. Dunkerton and persons acting in concert with him.

Related Party Transaction

As noted above, Mr. Dunkerton is the Company’s Chief Executive Officer and is a substantial shareholder for the purposes of Chapter 11 of the Listing Rules. Mr. Dunkerton is therefore a related party of the Company. As a result, his participation in the Placing constitutes a ‘related party transaction’ for the purposes of Chapter 11 of the Listing Rules (the “Related Party Transaction”) and requires approval by Independent RPT Shareholders.

Accordingly, the Related Party Transaction Resolution will be proposed at the General Meeting to approve the Related Party Transaction. As required by the Listing Rules, Mr. Dunkerton has undertaken that he will not vote on the Related Party Transaction Resolution and has undertaken to take all reasonable steps to ensure that his associates will not vote on the Related Party Transaction Resolution.

Capital Reorganisation

The Open Offer Issue Price (being £0.01 per New Open Offer Share) is lower than the nominal value of the Existing Ordinary Shares (being £0.05 per Existing Ordinary Share). However, the Company is not permitted by law to issue shares at an issue price which is below their nominal value, so Shareholder approval is being sought in connection with the Open Offer (but not the Placing) to complete a sub-division of the ordinary share capital of the Company so that each Existing Ordinary Share will be sub-divided into one New Ordinary Share of £0.01 in the capital of the Company and one (effectively valueless) Deferred Share of £0.04 in the capital of the Company.

Given that the Placing Issue Price is the same as the nominal value of the Existing Ordinary Shares, there is no need to reorganise the Company’s share capital if the Placing is implemented.

Articles changes

It is proposed that the Current Articles be amended to reflect the Delisting by removing the provisions that relate to the Company’s listing which will no longer be relevant. It is also proposed that the Current Articles are amended to remove certain provisions relating to the retirement of Directors. In addition, if the Company implements the Open Offer, in order to give effect to the Capital Reorganisation, it is proposed that the Current Articles be amended to make changes to set out the rights attaching to the Deferred Shares.

Intentions of Mr. Dunkerton and views of the Independent Directors

Mr. Dunkerton is the co-founder of Superdry. As such, he is keen to ensure the long-term viability of the Company and, accordingly, has agreed to participate in the Open Offer or the Placing (as applicable) to ensure that the Company can address its liquidity issues and achieve its stated objectives.

Mr. Dunkerton confirms that, subject to the implementation of the Restructuring Plan, he proposes to support the Company in the overhaul of its operations, as more fully described in the section above “Background to, and reasons for, the Capital and Restructuring Measures”.

In furtherance of the foregoing, Mr. Dunkerton intends that:

• internationally, the Company will significantly reduce its cost-onerous store footprint over the next 24 to 36 months, including approximately 25 to 30 European Stores already identified for closure over the next 12 months (including a small number which have already closed) and a detailed review will be undertaken of its international footprint to identify additional stores for closure, or sale of stores to franchisees or other third parties, coupled with headcount reduction associated with these store closures or dispositions;
• the Company will implement a new third party e-commerce platform to replace its existing proprietary system, which will enable a revitalised and more efficient e-commerce strategy in the UK and internationally;
• no changes will be made to the locations of the Company’s headquarters and headquarter functions, save that a number of the Company’s corporate and support functions will no longer be required as a result of the Delisting, which is expected to lead to redundancies in these functions;
• changes will be made to the Board such that, as soon as reasonably practicable following Delisting and, in any event, within three months of Delisting, the Board will comprise Mr. Dunkerton as Chief Executive Officer, a Chief Financial Officer with relevant experience (including turnaround situations), an independent chair and two further independent non-executive directors. Between the independent directors and the chair, at least one will have retail and brand expertise and another will have relevant and recent financial experience;
• while no changes will be made to the conditions of employment or the balance of the skills of the employees and management, head office headcount of the Company will be substantially rationalised to reflect the Delisting and the restructuring and rationalisation of the Company’s operations, including the substantial streamlining of management functions and reporting lines. Furthermore, the current levels of turnover of employees in-store due to organic attrition are expected to continue, which will result in a reduction in the number of in-store employees;
• the Company will modify the terms of its long-term employee incentive arrangements as a result of the Delisting, to devise an employee incentive scheme that is more appropriate for a company whose shares are not listed;
• no changes will be made to employer contributions into the Company’s pension scheme(s), the accrual of benefits for existing members, and the admission of new members; and
• no changes will be made to the deployment of the Company’s fixed assets.

Further, Mr. Dunkerton expects that following the restructuring of the Company’s UK property estate and retail cost base, there will be closures of certain stores in the United Kingdom as a consequence of the implementation of the Restructuring Plan, namely possible termination of certain leases by landlords due to the Company being able to pay significantly reduced rent or no longer being required to pay rent (which the Company expects to be applicable in respect of approximately 10 stores), as well as in the number of personnel associated with these store closures.

Mr.