Destination Maternity Corp. shares fell 42 percent Friday after the Moorestown clothing company and Orchestra-Prémaman SA of Montpellier, France, canceled their merger agreement. The deal had been struck in December, after the French children’s clothing company had pursued Destination Maternity for more than a year.
In a joint news release after the stock markets closed Thursday, the companies blamed “the challenges of satisfying applicable securities regulations in France and in the U.S. as well as the uncertainty as to whether those regulatory requirements could be satisfied without unreasonable effort and expense.”
Destination Maternity did not respond Friday to a request for further comment.
The company’s shares closed at $1.71, down $1.23, on the Nasdaq stock dexchange. The value of the shares has fallen steadily since topping $32 in 2013.
The breakup comes as brick-and-mortar retailers continue to be humbled by internet competition, triggering a steady stream of store closures and bankruptcies.
The relationship between Orchestra, which recently opened a store at the King of Prussia Mall, and Destination Maternity dates to at least October 2015, when Orchestra offered $25 million in cash and shares for Destination in a deal valued at about $17 per share.
When the two retailers finally reached an agreement late last year, there was no cash for Destination shareholders, and the offer was worth about $7.05 per share. That deterioration in value exposed Destination’s management, led by Anthony Romano, a former Charming Shoppes executive, to sharp criticism from investors on a conference call announcing the deal.
Orchestra still owns 1.9 million Destination Maternity shares, or 13.7 percent of the company. It has agreed to certain restrictions on the sale of those shares. Orchestra said in December 2015 that it had paid $16.7 million for a 13.3 percent stake in Destination. The whole company was worth $24.5 million on Friday.
In early June, the two companies said the deal remained on track. Combined, they were expected to have $1.1 billion in annual revenue.
A few days later, however, Destination released disappointing earnings for the quarter ended April 29. “Our financial results were challenging and below expectations,” Romano said. Sales were down 14.5 percent, and adjusted cash earnings were $6.3 million, down by more than half from $13.2 million the previous year.
On the plus side, Destination reported an 18.8 percent increase in online sales after the company revamped its online presence in February, Romano said.
Destination was founded in 1982 as a mail-order maternity-apparel catalog. It opened its first stores in 1985, and went public in 1993. Its stores now operate as Motherhood Maternity, A Pea in the Pod, and Destination Maternity. The company had 515 stores as of February, when it filed its annual report.