Mothercare bounces on talk of bid from Cinven

Investors in Mothercare got an early Christmas present today after talk of a potential private-equity bid sent shares in the maternity retailer soaring by 8%.

Buyout company Cinven is examining a possible takeover of the chain, which has issued three profit warnings this year and seen its shares tumble.

Cinven has not yet approached Mothercare but its plans could involve ditching the struggling 352-store UK operation to focus on the retailer's better-performing international business.

Cinven could team up with Paul Mason, chairman of homewares chain Cath Kidston, to lead Mothercare, which made a loss of £81.4 million in the 28 weeks to 8 October. Matthew McEachran at Singer Capital Markets said: "If the UK loss-making division can be turned around, there is substantial upside to be had."

Sanjay Vidyarthi at Espirito Santo sees the potential interest of private equity in Mothercare as "inevitable, given the share price decline, vulnerability in the absence of a chief executive and the attractions of the brand and the international franchise business".

But he warned: "Any initial intentions to close down the UK business and focus just on international are likely to be tempered on closer scrutiny. We maintain our view that landlords are unlikely to give Mothercare an easy time in terms of exiting leases early."

The retailer, which has 957 franchise stores overseas, has been without a chief executive since Ben Gordon quit last month. It is being run by chairman Alan Parker, former head of leisure group Whitbread, owner of Costa Coffee and budget hotels chain Premier Inn.

Shares in Mothercare today surged by 10.7p to 171.3p, valuing the retailer at £152 million. The group's UK division suffered a 7% fall in underlying sales in its first half, and plans to close 111 British shops by March 2013.