Member Info for Okehurst1

If we use Wood group as an example

Wood said Apollo made 2 private offers that were refused
the 3rd was made public

They then increased publicly further 2 times ? Stand corrected but that’s my recollection

THG say … £1,50 and £1.80 was privately refused
£2 + disclosed

And we go from there …

It makes sense based on how they operate ?

We need a credible £bid now and let’s see who else is out there

Am not … I want £3.7B

But we may have to go into ‘play ‘ to get that figure

The market decides

It’s looking highly probable that £1.80 is the base price from
Apollo - we might get £2, it will cost them £112M more cash on buying out 50% for the difference ?
Is that a deal breaker ? I don’t think so considering they could make £3B and more on this deal over 5 years

750M shares @ 15p over and above £2.7B EV

Then we find out who else is out there and ride it / or take the cash / depending on personal target returns

Going to be an interesting 2 weeks

Yesterday was shock tactics

Todays report was not via IG but for a private consortium
you have to wonder who would commission them ?

These 2 ‘ reporters ‘ have little credibility now I think the market discounted todays waffle and we closed almost 20% up from yesterdays low of 82p

Suggested earlier I think there is an agenda to push the £2.7B being the £1.80 a share as a fair price - it appears that way

‘THG's valuation suggests it trades at a 30% discount to the sum-of-the-parts. Using peers' comparables for Beauty (0.8x 2023 EV/sales online specialists average), Nutrition (1.9x EV/sales at 50% discount to nutrition specialists) and Ingenuity (1.8x 2023 EV/sales -- with the Commerce part at a 30% discount to application-software peers and Infrastructure in line with online specialists), we get a premium valuation of £2.7 billion. Structural beauty and nutrition sector growth and low profitability are propounding the case for a breakup’

Bit more meat on the bone across the 3 slides and regurgitation of yesterday as well

They appear to be hung up on £2.7B EV

Mentioned early that Bloomberg reporters had updated their assessment - behind a fire walk

Please find below pdf of same

https://www.linkedin.com/posts/kelso-group-holdings-plc_thg-sum-of-the-parts-valuation-activity-7060171636901072897-7vbY?utm_source=li_share&utm_content=feedcontent&utm_medium=g_mb_web&utm_campaign=copy

Up until Albercros related the £1.70 bid last year - leveraged buyout - to a secondary share purchase I thought the poster had a level of understanding of the situation even though they joined the BB in the early hours of this morning

I think the market is missing a trick here

Same as when we near 40p just over 18 weeks ago - we were within a whisker of a 180% rise from that point this week

An Apollo bid of £1.80 will get presented to the shareholders who are not twisting.

The THG Bod have no fiduciary duties to set the market price it’s a secondary buyout

The shareholders who are not staying on board will get an opportunity to vote at an EGM , yeah or neah to the offer

Within the time period another bidder presents a higher price for cash on same terms then the shareholders can consider that offer

If no other offer comes along then it’s £1.80 or vote against or sell in the market at whatever price the market sets at the time, this has no bearing on the Company itself

The Bid at £1.70 was a leveraged buy out with the debt burden on THG

It’s apples with pears when measured against the muted current proposal

Albercos

Let’s assume the highest price Apollo will pay is as you say - £1.80 for this example

I don’t think MM cares if it’s £1.80 or £2.50, there is no commercial argument to say he won’t take the £1.80
The lower the better for MM / BoD as the ‘ carry’ kicks in, if he could get the 60% to take 50p his ‘ carry ‘ is in the money sooner, the BoD have no fiduciary obligations to refuse £1.80 it’s not new shares, it’s buying out secondary - that’s the key point

I agree with you that £1.80 may well be the opening salvo from Apollo , the BoD throw it to the shareholders and we vote on it

In the meantime IF another bidder enters the fray and trumps the Apollo bid then it becomes interesting

The BoD will have down their job and the market decides maximum price

First thanks for joining the BB today to explain why you think we are £1.80 top end

I could respond with a long response but I don’t think it’s worth the energy, there is nothing we can say that can influence the market, it’s just opinions , PI’s on here can of course make their own mind up on your points / timing

Forgot to add

We had a poster on this BB this morning - a newbie - just after midnight , they argued why we are £1.80 take out

We had the Bloomberg couple send out yet another article at 8am but this time more charts / waffle why the value is magically £1.80 on the take out

If you want to get a gist of the content read the post off the new poster - think it’s 12.01am this morning
It’s a a gist of the latest Bloomberg piece

Firewall behind the new article from 8am, they have more charts on why it’s £1.80 bla bla big as I say read the post off the newbie it’s very similar, nothing much to add

Hence am going for £1.80 plus premium to £2

Personal view

Apollo will bid £2.7B EV plus a premium

So £1.80 plus 10% premium … £2

It’s above the £1.70 from last year

THG Bod will put it to shareholders not rolling - it makes no odds to the BoD on paper if it’s £2 or £3 they ain’t selling

We get a date to vote at an EGM and within that process we may /or may not get an approach from another party

If we don’t then the £2 is the market price it’s up to holders on the day

Let’s see how this ages but gut feel it’s circa the £2.7B too
much noise around this level

Hi Albercos

Good post.

Suggest strip back below to do same to each of the 3 Core business as standalone entities, it’s a mute point but remove
On Demand / everything else and just work on those 3 and treat standalone - think of each as 3 separate businesses
you can work out the margin Ingenuity charge Nutrition / Beauty

Then look at each entity independently and place your assumptions, then cross reference to Industry / sector pro rata valuations on each entity today, rather than an across the board average

The key to unlock value here is Ingenuity, fund independently, the tangible assets have the capacity and have enjoyed £Billions of investment to date, appreciate it’s a bet but it has to be worth £500M EV today - as figure - with £19B of global GMV capacity
Place 1% EBITA on that number which appears to be industry normal, growth should be fast in this business
Appreciate it’s difficult to evaluate but that’s the Bet / Opportunity

Do the same for Beauty/ Nutrition then as mentioned cross reference for each sector, - suggest you can pull out some decent operating costs same time

Finally look at the USA for serious Growth, both businesses now have a platform to attack this market, as standalone businesses ROCE can be measured.
Worth mentioning each are currently number one globally in size in their sector as pure end to end D2C.

Suggest the FT have used the above model to get to £3.7B EV
and granted all models are subjective, however Apollo are not carrying the risk here once Ingenuity is funded externally, they are not taking 100% of the equity, management have got serious skin in the game as have the employees, other than a ‘Carry ‘ for the BoD there is no post deal dilution for Apollo
this is a Goldilocks deal

I’ve not included the £2B tax losses btw that’s just pure bunce if we want to work on net net returns for next 5 years

Saying all of that and the fact 50% maybe even 60% of current shareholders may roll into the new entity then £2 to £2.10 is not overpaying for a low risk investment

It’s needs a 2 from Apollo

Anyone doubting THG are staying on the market

Reckon we bounce up tomorrow

Ha! Meant to say

A tale of Two Charles Allen’s

One says £1.80p is top price

The other says £1.70 is too low

30p downside from here - short term pain

90p upside minimum

Decent odds

No RNS and we know talks still ongoing

30p to the downside ?

90p min upside - if you go with the other

Other than except a higher entry point for his Carry there is not much MM can do, it’s all about Apollo rd the price
Am guessing personal terms and the shareholder agreement is sorted

They (Apollo) either want the deal or they don’t

Pay up a fair price to take a decent stake with everything in place and a chance to double your $$ in 5 years or walk away
but your not nicking this for a big discount to £EV

THG don’t have to comment on a media story / reporters opinion that they have already RNS’d about

The fact there hasnt been an RNS nothing has changed