Al Alfia Holdings' indicative 70¢ a share takeover approach to Specialty Fashion was "well-timed", Citigroup's research team writes in a note to clients.
With "a change in sourcing and relocation of head office for Rivers, Specialty Fashion is likely to see better results in 2017 financial year," the analysts said .
Specialty Fashion was trading on a consensus one-year forward EV/EBITDA of 3.8 times and PE of 12.4 times before the bid, which was first reported by Street Talk, from Al Alfia.
"This compares with industry multiples in discretionary retail over the past 10 years of 7.6 times EV/EBITDA," Citi said.
"The acquisition multiple is lower than benchmark transactions but reflects the company's low margins and need to lift capex," the analysts added.
"Clarification of the takeover is likely in the next few weeks post results and our base case is a deal will proceed."
The broker has a "buy" recommendation and 70¢ price target.
