THG shares soar as investors get ready for a multibillion-pound bidding battle

THG shares surged yesterday as investors prepared for a multibillion-pound bidding battle for the online beauty retailer.

  • THG stock rose 24.5%, bringing its value up almost £400m to £1.8bn
  • The company stated that it had rejected the offer from Belerion, King Street.
  • Nick Candy, the property mogul, announced his intention to purchase THG

After two buyers emerged on Thursday, the stock rose 24.5% or 28.55p to 145p. This pushed its market value up to almost £400m, to £1.8billion.

The company, which was formerly known under The Hut Group, stated that it rejected a £2billion (170p) bid from Belerion Capital or King Street Capital. Nick Candy, a property mogul announced that he was going to take over the make-up and beauty giant.

Iain McDonald (founder of Belerion) has been an early backer since 2010 and a non-executive Director ever since.

Analysts and investors agreed that potential bidders will need to increase their offers to attract chief executive officer and founder Matt Moulding. They also suggested that a 200p offer (or £2.4billion) would be the minimum THG would entertain. Given the drop in share prices over the past six months, the bids are not surprising. Moulding, himself, stoked the flames after he stated in November that the London listing had been ‘sucked from start to finish.

Because he holds a special share that allows him to block potential bidders, his approval is crucial to any takeover’s success.

Markets analyst Neil Wilson said that the 170p offer from Belerion wasn’t enough. Moulding and the other investors will not be attracted by this offer. Let’s take a look at Nick Candy’s offerings. To get started, 200p is the minimum.

Candy is believed to be interested in taking THG private. A source close to Candy stated that Candy could make a formal offer by next week.

According to the source, he is very serious about this deal. He is familiar with Matt Moulding, I do not know if he has met him recently. He said that Candy had hired bankers, but he would not name them. Candy has had bankers from Deutsche Bank in the past.

It would be Candy’s first major acquisition deal if it is successful. In 2019, Candy was considering a takeover by Capital Counties, a property investment trust. He also expressed an interest in purchasing Chelsea Football Club.

THG’s largest shareholder said that he was “sitting tight” in the expectation that more bids would come in. He also stated that a 170p per share approach placed a low value on THG in relation to its sales. Recent private transactions for similar health and nutrition businesses like Nestle’s acquisition of Orgain attracted a much greater valuation.

The investor stated that THG was significantly undervalued. Another investor stated that THG would be removed from the market in the current year and said it was confident it would.

Private equity bidders might also be interested, according to the fund manager. Apollo and Advent International were previously linked to the company.

Others were sceptical that a deal would be made, noting that THG shares closed yesterday at 14% below the rejected bid price. Roland French, an analyst at Davy, stated that the market was discounting the possibility of a bid approach in short term. THG’s language is heavily caveated.

THG was the largest London float since 2013’s Royal Mail. Shares topped 800p but corporate governance questions and concerns about Ingenuity, its tech business, have sent shares plummeting.

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