THG shares jump 25% but fail to hit price of rejected bid

Shares in THG rose as much as a quarter on Friday after the ecommerce company disclosed it had rejected a £2bn bid approach from a firm led by one of its own directors.

However, the online beauty and nutrition retailer’s share price was still almost 30p below the 170p offer from Belerion Capital and King Street Capital Management, revealed after the market closed on Thursday.

Belerion is an investment firm specialising in early-stage ecommerce and technology companies, which also runs a concentrated equity fund. It has no past history of buying large companies.

Its founder and chief investment officer, Iain McDonald, is a non-executive director at THG — formerly The Hut Group — and is thought to be close to Matt Moulding, the online retailer’s founder and chief executive.

King Street is a US investment firm with about $20bn under management. Its co-founder Brian Higgins has a background in distressed debt investing.

THG’s disclosure of the Belerion and King Street approach, which was made without the bidders’ consent, appeared 15 minutes after a statement from Candy Ventures, the investment vehicle of property entrepreneur Nick Candy.

The firm, whose previous holdings have tended to be private entities and smaller companies quoted on London’s junior stock market, said it was in “the very early stages of considering a possible offer” for THG.

Like Belerion, Candy Ventures has no history of buying larger entities, despite having been linked to property developer Capco in 2019 and Chelsea Football Club more recently.

Both Candy and the Belerion/King Street consortium are now subject to a “put up or shut up” deadline under the UK’s Takeover Code and must state by June 16 whether they will proceed with an offer for THG or walk away.

Some observers expressed bemusement at the Candy statement, given that deliberations appeared to be at an early stage. “There’s no way it’s in their interests if they are serious,” said one person who follows THG.

Candy declined to comment, as did King Street. McDonald could not be reached for comment.

THG sells nutrition and beauty products online and markets its technology and logistics expertise to consumer goods groups and other retailers.

Analysts said the approaches were unsurprising, given the decline in THG’s share price over the past six months. Even after Friday’s bump, THG’s market value was £1.42bn, less than its £2bn of sales last year and well below its £5.4bn value at its initial public offering in September 2020.

The group has suffered from a global derating of growth and technology stocks, and there have also been questions about disclosure and governance. THG has responded by pledging to scrap a “special takeover” defence, signalling a move to the premium segment of the London Stock Exchange and installing City veteran Charles Allen as chair.

Big buyout groups such as Apollo and Advent are known to have looked at the company but so far have not tabled a formal offer.

THG expects sales to grow by 22-25 per cent in the current year, though it has cautioned that profit margins will come under pressure because of commodity price inflation and other cost increases.

Heavy investments in technology and logistics are also likely to mean that the company becomes a net borrower this year.

It has granted an option to Japanese investment group SoftBank to buy a minority stake in its Ingenuity technology division for $1.6bn, but many analysts no longer expect this to be exercised.

By early afternoon on Friday, the group’s share price was trading at 146p, up 25 per cent on the previous close.

Source: Financial Times