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On current share price and a reduction of shares Remain will be valued at just £700M m/cap ,£350M per business pro rata plus debt

£20M combined capex

£2B almost pf sales

£FCF positive

Looks at steal at this level going forward ?

SOTP is the back stop support ?

Hi OSG

Like yourself I don’t trust MM but he has been weakened over the past 12 months but saying that he’s a ‘ crafty’ operator who would have thought Ingenuity would be spun off into a private Co in the manner it has ?

Worse case or maybe best case, Remain stays intact and we get a full listing in March, £20M capex and churning cash on near to £2B revenue, either way THG at these levels is a decent punt in my opinion

Small point but relative to where THG has been

Remain Capex down to £20M a year, is that £10M a business pro rata ? As a figure?

Standalone Beauty with £10M capex / no debt or interest payments with £1B of sales, could it produce £80M FCF, it looks doable

Arguably that’s a £1B EV + valuation in todays market ?

Stripping out MP into a shell is bunce on top and is a vehicle to fund / pay off debt but retain some level of control , will Remain assets ever get the full value until both business’s can be valued independently?

Steve, I’ve not seen anything on the 10 year contract or terms but take on board your point, do you have any links ?

Not saying you are wrong but can you share any research on this point ? Are there any break clauses?

I was looking at the 2 year transitional period 2.3/3.2/3.3 demerger doc ,it appears after 24 months unravelling of inter company services are complete except for distribution?

Could MP negotiate the distribution contract at that point, do they have to put all new business through Ingenuity?

I don’t know but we do know MP is fully standalone in 24 months ex distribution, that’s when hard talking begins when you are paying out £140M a year, especially if there is a break clause - you would except there is but then again this is THG and the MM show

Just on Selkirk, why set up a quoted SPV shell with a view to pick up 49% of the target and have the confidence Banks will fund PE style with all the risk of not being in full control, put aside not knowing the market and business being acquired?

You would need a good story and know the target well?

Iain Mc has made one bid for £1.70 for the group 2 years ago, is this him coming back for a 2nd bite for the bit he wants?

He’s thick as thieves with MM it’s smart way to sort the debt out, maybe pay a bit of cash to Remain shareholders and they get paper , keep control ,the market can then value MP standalone, look at APN m/cap in comparison and the sector as a whole?

THG Beauty is then by default debt free / standalone

It’s a neat way to tidy everything up.

Iain Mc apparently made a Bid in 2022 for the whole group at £1.70, is he just coming for the division he wants being MP?

Ingenuity only has a 2 year gig with MP, £140M of distribution cost to be negotiated at that point, he knows the business inside out and has access to the finer detail within the business

Remain shareholders retain 51%, debt sorted, which is a big one and Beauty is standalone, it’s what the market wanted ?

All delivered ?

Kim, that’s my take.

Remain pay off debt

Maybe pay a special cash dividend with surplus - no company taxes due to all the losses on book

Plus a distribution of Selkirk shares of £500M which are distributed by Remain

Selkirk management have their carry on the £500M pro rata they raised and their £12M etc

Iain Mc knows THG back to front and big pals with MM ,this may well have been gamed out between them

Remain is then pure Beauty no debt goes for full listing as planned

It’s actually quite a decent tidy up, ovs Apollo may crash the party as they have done their DD, it’s possible ?

Suggest the market is looking past FCF/ fundamentals and is focusing on SOTP and Remain is heading to being in play break up or full PE bid

Would leave Beauty standalone with a FTSE full listing

no debt

Remain shareholders had the chance to get a piece of Ingenuity, Selkirk newco and cash and their equity in Beauty

no debt

Selkirk is just one part of the equation, hence Iain Mc left to put together with MM blessing

Guess work but it does work to unlock value

Selkirk raise £500M, however they do that via Funds/Banks whatever, it doesn’t matter to us

It would have to be clean in terms of it would only have a charge on the Selkirk equity

Selkirk offer £1B cash / paper as discussed

Selkirk team have a ‘ carry ‘ on the 49% , 20% of the upside

Iain Mc knows THG inside out

MM trusts him

Makes sense as a strong possibility?

Hi Ryan on the same page just the numbers / structure

Selkirk value MP at £1B

They offer £500M cash and £500M Selkirk paper give or take

THG Remain could pay off debt and distribute the balance of cash to shareholders as a dividend and of course a dividend in species of Selkirk shares ?

Would this bring PE out the woodwork to Bid for Remain and scupper above ? Maybe ?

When we look Applied Nutrition at almost £400M M/cap on

£100M revenue with 3rd party distribution what’s the take out price for MP ?

Reverse MP into Selkirk with the shell funding a 49% stake cash offer, THG shareholders get 49% of the value in cash balance in paper

Selkirk bid 1.3X Rev and headline is £1B they need £500M cash.

Any views ?

Hi KNK

EV is nearly £900M at the moment

Depending on your view of where capex sits ,FCF is £77M to £43M for Remain before debt repayment, I think it’s the latter and suggest the market worked that out; so it’s fully valued at 20X FCF in my opinion as we have to add debt/EV plus of course the MM factor

Remain needs to improve its net margin by 2% if it’s £43M, to double FCF ,with Sweet Whey up a wedge this year I just can’t see that being achieved

MM top slicing 25% of revenue for his private concern doesn’t help, it’s a hefty £400M of cash from Remain and could it get better terms in an open tender ?

The market has voted with its wallet

Looks like MM won the battles to retain control

He can now filter 25% of the revenue out of Remain Co and do as he wishes within a Private Co, when the timing is right buy out the smaller shareholders or dilute via a placing, no wonder he celebrated in Dubia

Whatever you may think of him he is a smart boy

Make your call on FCF in Remain, is it £77M if you think capex is included or £43M if not, if it’s the latter then the share price is on the money if the former the market has it wrong

Remain co would need to improve margins by 2% to near double its FCF if it’s the latter, that would take a serious improvement in Nutrition

Good post Elmsley, any view on below

In your opinion what’s stopping MM in 6 months offering to buy out the minority shareholder via a scheme of arrangement ? Assume the Neds are toothless in this scenario

This could be a blessing in disguise, speculating.

The big investors are now focused on Remain doling out a £4B contract to ingenuity if it was 10 years ?

Ingenuity only has £170M of external revenue a year, do they burden Remain with this contract ?

Or remove MM from day to day control, place a new chairman within the group with a new BoD and review their options.

MM has to go one way or another, he has destroyed shareholder value

If it’s going to happen it’s now

LD, makes sense

Roxi how would they restructure the debt?

Ingenuity nicking the placing money and needs the £400M a year supply contract or it’s gone, so without that contract how would they pay off existing bond holders and secure a new one just for Ingenuity? The £400M a year contract is survival for Ingenuity but can they secure standalone new debt ?

Throw in Nutrition which is going backwards and Sweet Whey up 20% plus this year, who would take the risk on the pro rata debt there ?

Then we are down to allocated debt in Beauty, do they take the rump ?

Can only imagine the negotiations on going within the large shareholders / MM / Bond holders / landlords/ banks etc

Some lawyers must be involved with all these groups

Then we have the employee scheme, it’s a mute point ,as whilst small in percentage it’s large enough to be heard, do they think MM has done a good job and worth backing or they become more commercial minded as he is driving this into the ground ?

MM looks more and more exposed all round

Steve is correct

He loses the BoD and he’s out, the whales who cornerstone’d the placing could join with the ones who didn’t and push him to resign? Doubt he would go without a fight then it’s down to a vote on the day at an EGM as Steve says

That could be a good outcome for shareholders, the market would like it I guess, it’s only going one way with MM

It’s focused both parties minds on the small print that’s the point and the delay

MM will want control of the BoD of Ingenuity, he may have thought he could get it ?

Can’t see the big boys letting him retain control, they know his MO

They could just kick him off the BoD when they are ready if they have the seats

He will then want representation on Remain so they battle with him there as well

The big investors know he’s a liability in both business’s now is the time to take him out

# Ingenuity is pro rata £170M external Rev not £150M