Tomorrows Times20 May 2022 22:40
THG ‘must reject bids below £2bn’
Investors in THG have said that the ecommerce company should not entertain takeover offers below £2.5 billion after a surprise bid from one of its board members and a tentative approach from Nick Candy, the British property tycoon.
Candy Ventures said last night that it was in the “very early stages of considering a possible offer”, prompting THG to disclose minutes later that it had rejected a 170p-a-share “unsolicited, highly preliminary and indicative non-binding proposal” from a consortium fronted by Belerion Capital. Iain McDonald, Belerion’s founder, has been an early backer of THG and a non-executive director since 2010 and owns 6.8 million shares in the business personally and through his firm. The proposal values THG at £2.1 billion.
THG, previously known as The Hut Group, operates more than 100 international websites that sell brands direct to consumers through its Ingenuity platform. It was founded by Matt Moulding and John Gallemore in 2004 originally selling CDs online.
One of THG’s biggest shareholders told The Times that he was “sitting tight” in the expectation of more bids and said that a 170p-a-share approach only valued the business at one times its sales. Recent private transactions for similar nutrition and health businesses, such as Nestlé’s acquisition of Orgain, were going for five times. “Our view is that THG is significantly undervalued,” the investor added. He noted that while THG’s shares had fallen dramatically since its listing in September 2020 other ecommerce stocks including Boohoo, Asos and Ocado had lost two-thirds of their value and he believed that THG had bigger future growth prospects.
Scepticism around whether a takeover offer will emerge meant that THG’s shares still closed 14 per cent below the rejected bid price. They rose by 28½p, or 24.5 per cent, to close at 145p yesterday, valuing the company at £1.77 billion.
Roland French, analyst at Davy, said “The market is discounting the probability of a bid approach in the short term — the language used in both statements was heavily caveated. However, it does feel like the beginning of the end for THG as a public company and its value recovery will rest in the hands of private capital”. French said that a private player could split up the business and sell its various nutrition and beauty divisions for higher multiples.
Another investor said that he believed the 170p price was a “shot across the bows . . . we shouldn’t be selling for less than £2.” That would still be 60 per cent its 500p listing price.
Belerion, which specialises in investing in ecommerce firms, has never made a big acquisition. Candy Ventures has also no track record of large takeovers, despite mulling a takeover of Capital Counties in 2019 and recently declaring an interest in buying Chelsea Football Club.
A source close to Moulding said that while he and McDonald had known each other for more than decade, Moulding also knew Candy socially.
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