Member Info for Okehurst1

Hi guys just dropped onto the BB

That’s the £Number they told us on the Conf call, in fact they reiterated 6% to 5% of revenue on intangible capex for next few years

One telling point - am guessing others remember the conversation - the CFO was not on the call, another member of the finance team was pushed a number of times, gist being

‘ is this level of capex fixed ? Can it be switched off?’

It took the analyst to repeat 3 times before the reply was

‘ yes, it’s all intangible capex the fixed assets ( property ) are already in place ‘

For me it was the most telling point of the call

‘On the face of it, the three core divisions in THG, if valued separately on their own, are unique assets that could be highly valued in the market, based on how listed peers of each division are valued. THG is a combination of a leading global online re-seller of premium beauty products, a fast-growing global lifestyle foods brand focused primarily on the growing segment of sports nutrition, and Ingenuity Commerce business which offers e-commerce in a box proposition with a SaaS model, but with the proven skills of building brands and online businesses. The three businesses combined generated over £2.2bn in sales in 2022, and if separated out, would be highly valued strategic assets in their own rights. Our SOTP valuation = 221p target price’

https://on.ft.com/40jCdgy

Rock , agree

If he doesn’t have 65% but even 45% it’s doubtful we get a hostile bid

He needs a deal …. Has to be involving ingenuity to fund the £135M

Sort that and we are away

Rock, your post lays out the situation he is in.

MM will have a have a plan B

Exactly ….

He needs £135M a year- for years -for Ingenuity Sass - that’s what they told us

Nutrition and Beauty churn the cash and no longer have rent but pay 35% to Ingenuity - that’s all in place

Their combined EBITA margin 6.3% after the above with a target of 9%

So spin out Ingenuity -which was always the commercial option - assume Apollo think it’s worth £1B as indicated, sell them 50% in that one entity, Ingenuity is debt free and has £1/2B to roll out the SaaS element ?

Surely thats a deal that everyone wins? THG, BoD, the 100%? And Apollo ? Put aside Ingenuity staff/ customers ?

Will we get £EV?

Assume we got £2 as a figure

Qatar boys would have to stump up £1B they would have 43%? What control would they want ? Not saying it couldn’t happen but MM wants control ?

Would some of the 65% want £2? Qatar stump up even more and get to 50% ? Would MM want that ?

Good point Rock

Not sure Hosia, guess word will get out over the weekend

If MM has 65% support and he won’t ‘ share’ control then we can 2nd guess they have to spin out something to raise funds for Ingenuity SaaS or at least trim it to FCF a neutral as such it’s now a plod to grow sales / margins

It’s fair comment off MM, in affect he sees us as speculators, we know that now, he did the best for the 65% and the business

It would have taken 3 months at least to conclude the deal

not sure the GS was a red line for Apollo? It’s gone anyway in a few months ?

Price and rolling shareholders wanting the same rights as Apollo looks like the big issue

They had heads of terms and Apollo chipped the price at the death

THG dug in

Apollo upped the price but wanted preference shares in the new entity

Neither side blinked

Re Apollo they would want stuff like they get paid first on a sale to the £value they bought out the ‘ 35%’ etc …

Assume net debt is £140M to £180M post disposals - we may have missed the boat on the disposals with commercial property being in the state as it is

Throw in Ingenuity requires annual £135M intangible capex for MM to fulfil his plan

I don’t think we can do a buyback or that’s even commercially viable

Ideally we continue to reduce debt - we had £70M FCF and same debt reduction since October last year

Get the net debt down and we save £60M a year in interest when the Bond expires

Ingenuity needs to be spun off / raise capital if MM is correct and Apollo value it more than THG on the market today cut a deal with them to buy into Ingenuity and spin out ?

Makes sense ?

Kelso notes THG's announcement whereby it has terminated discussions with Apollo. We note the comment about previous views of the board being on 'public record' which we take to mean the previous rejection of 170p a share from a year ago.

Kelso is pleased to see that the current positive trading momentum has continued during 2023 with improved profitability and cash neutrality in the current year. We note the comments about cashflow positivity in 2024 and a 9% EBITDA target in the medium term, which would produce £200m EBITDA on c.£2.22bn of sales.

Kelso previously made a clear statement setting out what we would like to see THG do. This included a focus on cash generation, a move to the premium index of the LSE from the standard index, a share buyback which we would urge the company to enact rapidly, clear shareholder communication and a clear value realisation plan.

Kelso invested in THG because it believes in its strong underlying value. We believe more strongly in this view following this morning's announcements (RNS and LinkedIn) which clearly show the board of THG and Apollo also share this view. We also note the tailwinds from reduced whey prices and logistics costs and reiterate our previous comments about the sum of the parts valuation of the business being well above the current market value. We commend Matt Moulding on his open and honest LinkedIn post and look forward to being able to remain a shareholder of this exciting company.

Agree

Still no word on premium listing, think it’s obvious now that MM wants us 35% out - he’s pretty much told us

Looks like Apollo played hardball last minute and THG BoD didn’t blink, think many of us LTH’s would have felt short changed with £1.50 as figure - weird as that sounds when we are 70p

Lord Allen told us £1.70 undervalued THG, we can guess the offer didn’t surpass that figure and Apollo wanted more board seats than MM/BoD would allow - Apollo upped the price to pay but wanted more BoD seats in return is my take

So we now know the Insiders make up 65% of the share register and MM feels confident he has their support

The market has digested quickly that he can Bid to take private if he can find /or approached by a white knight to buy out the 35%

Mute point, nice to know we have just had a plc Audit then a full on DD by Apollo and there were no gremlins in there, it was all about price and control in the end

Rock, it was all mainly all retail / retail traders

MM wouldn’t be giving the heads up to PI m8’s that’s not going to happen

Punters had a lot of profit , they got spooked and took some profit

Everything pointing to an Offer coming, it’s just at what price?

Not long to wait now

Disagree Rock

II’s have held 100% firm - complete opposite to last year

And …. When the 2 NED’s resigned last year and the names of the 2 new NED’s

Rock, fully understand that’s a chunk of change.

It was mainly all retail today

Personal view if this gives comfort

Apollo will have a set procedure on how they manage due diligence, it will have cost them serious $$ and time to deliver this DD, if they had a red flag we would have known and the deal would be off, - don’t forget Apollo were already working on the DD and the Mail spooked the plan and the takeover panel stepped in demanding clarification

However before they committed $$ Apollo would have agreed

HOt’s ( heads of terms ) and a draft SA ( shareholder agreement) with the BoD, it’s the logical and only way to work

MM / BoD won’t be giving PG’s ( personal guarantees ) over and above the accounts they just signed off and they won’t warrant the forecasts as they are getting no £P’s upfront out of this.

So deal is on, we can take that as fact, if it wasn’t we would now know

The price is another conversation, who knows where that is ?

The vast majority of trading today was via retail punters - just fact again

If the Apollo IC ( investment committee ) want to sign off on price then it’s already agreed or it’s the weekend for Monday

Am punting on tomorrow but it could be Monday but for what’s it worth I think an offer is highly likely, stay cool

Rock is looking at half the picture

You need to look at who was doing the volume ?

In the main all retail brokerages