Less than the Value of THG Ingenuity again3 Jan 2024 08:39
"today thg announced that we’ve rejected a bid from us pe giant, apollo global, and ended discussions.
why?
just about every major pe firm has enquired about taking thg private. usually, nobody finds out. but if there’s a leak, then the takeover panel forces an announcement. this is what happened with apollo.
pe interest isn’t surprising. for the 3 years before ipo, thg shares traded at £3. having doubled in size we then listed thg at £5 a share in sep 20. they rose to £8 in the first-year post ipo but, after the numis led short attacks when they weren’t made a broker to thg, shares fell to as low as 30p in late 2022.
the last time thg shares traded at 30p was in 2009, when the group had £80m sales and only sold cds! today thg is 28 x bigger (and we haven’t sold cds for years).
pe firms usually want majority ownership. we’ve been clear: don’t bid if you want 51%, plan to use debt to leverage up, or won’t allow existing shareholders to stay invested. this rebuffs most pe firms.
c65% of thg shares sit with me and several long-term shareholders. our lse pain comes from some of the 35% of “fast money” shares actively trading. i’ve personally spent £39m since ipo, increasing my stake & reducing thg shares on the market. the most recent being £5m at 39p in late 2022.
yes, it’s unpleasant being listed in london. but i’ve spent 20 years building thg, from an idea while sat on my sofa, into a global group with sales of £2.2bn. we’ve just completed a vast expansion of our tech and global infrastructure. we’re just getting going.
it’s well known that pe deals are lucrative for management. thg would be worth billions more away from the daily market manipulation involving bankers, hedge funds and pundits.
pe typically give management 10% of the company as an incentive, with 5% to the ceo. these incentives are worth hundreds of millions to staff. pe can be compelling.
like with all previous bidders, the apollo bid wasn’t right for thg. yes, it allowed existing shareholders to stay invested, with me continuing to run the group. but apollo also wanted pe controls, particularly across beauty & nutrition where they asked for controlling equity rights.
like all previous bidders, apollo were told their bid valuation & structure was unacceptable. yesterday apollo set out how they could raise their bid further, ahead of a deadline set by the takeover panel. their latest view on ingenuity had it as being significantly more valuable than the whole of thg the day before the bid leaked! (65 - 68p)
no ****! ingenuity is great. but neither apollo’s bid price, nor the structure proposed, are in the best interest of thg. myself, charles and the board, supported by>50% of shareholders, all agreed on that.
and so, the apollo bid was based upon smart financial engineering, capitalising on a wildly low share price from thg being on the lse. i get excited about building and growing things, not spread
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