Shares of Manchester e-commerce, beauty and nutrition giant THG plc rose about 20% on Thursday after it revealed it has received “indicative proposals” on a potential takeover of the firm from “numerous” parties in recent weeks.
THG CEO Matthew Moulding said: “The board has concluded that each and every proposal to date has been unacceptable, failing to reflect the fair value of the group, and confirms that THG is not currently in receipt of any approaches.”
THG went public at £5 a share in September 2020 and the stock rose to around £8.
However, THG shares have since fallen to around £1.10 — giving the firm a stock market value of about £1.3 billion — following a disastrous presentation to investors last October and concerns over the company’s structure, transparency and governance.
The news on the rejected bid proposals came as THG announced 2021 results showing group revenue rose 38% year-on-year to £2.2 billion and adjusted EBITDA came in at £161.3 million.
For 2022 THG said it anticipates adjusted EBITDA “to be broadly in line with FY 2021” and added: “Whilst market commentary cautions continued pressure on consumer spending due to macro-economic factors, at this stage of the year the revenue guidance outlined on 18 January 2022 remains unchanged at +22.0% to +25.0% CCY (before the c.1.0% revenue impact of Russia / Ukraine).”
AJ Bell investment director Russ Mould said: “Having joined the stock market amid significant hype about its future growth potential and then fallen flat on its face amid criticism around corporate governance, a lack of transparency and a squeeze on margins, one might wonder why THG has attracted takeover interest.
“While the company hasn’t disclosed who was behind recent approaches, one can only speculate it is private equity looking to sift through the bones of the company after its share price collapse.
“Even bad businesses might offer some value if you look hard enough.
“Chief executive Matthew Moulding has had many a cold shower since THG joined the stock market and he certainly isn’t going to let an asset stripper pick up the company on the cheap.
“Whether his idea of what the business is actually worth is reasonable or (more likely) in fantasy land, one cannot help feel that long-suffering shareholders might welcome a chance to get out now at a small premium to the market price so they can at least cut their losses and put the sorry episode behind them.
“The share price is trading 80% lower than its 500p IPO price in 2020, making it one of London’s worst stock market listings in recent years.
“As for the latest state of play, THG’s trading update contains more adjustments than a tailor’s shop.”
THG CEO Moulding said: “In our first full year as a public company, 2021 saw us scale revenue and expand our business model, well ahead of targets set at IPO.
“We delivered a record revenue performance for the year, with group revenue up +38% year-on-year to £2.2bn.
“On a two-year basis, THG has grown revenues +95%; effectively doubling the size of the business.
“Alongside significant revenue growth, FY 2021 saw us acquire and successfully integrate a number of complementary businesses, deepening our vertical integration across both Beauty and Nutrition and expanding our reach to consumers across the globe.
“The operational resilience and performance of our Ingenuity infrastructure, especially during our peak trading period was a highlight, as was the opening of our automated warehouse at our ICON technology campus, delivering material improvements and cost savings across our global storage and delivery infrastructure.
“Our technology platform is now powering an expansive list of global brands across a multitude of sectors, and the number of third-party websites has almost doubled during the year.
“We also continued to progress governance within the group through the year, and I was delighted to announce last month the appointment of Lord Charles Allen as our independent non-executive chair.
“Charles’ extensive boardroom experience will help the group continue to drive profitable and sustainable growth, and to meet the highest standards of corporate governance.
“You will all be aware that there has been significant speculation about possible third party interest in THG.
“I can confirm that the board has received indicative proposals from numerous parties in recent weeks.
“The board has concluded that each and every proposal to date has been unacceptable, failing to reflect the fair value of the group, and confirms that THG is not currently in receipt of any approaches.
“We continue to focus on delivering our exciting growth strategy across a number of large global sectors, and prepare to step up to the premium segment of the LSE at the appropriate time.
“I would like to thank all THG colleagues for their dedication and hard work in helping us achieve such a strong performance for the year.
“We remain confident in delivering our strategic growth plans for the year ahead and beyond, with full support from the board and our new chairman.”