5th Jun 2023 12:43
(Alliance News) - According to the Sunday Times, Asos PLC received a takeover approach from a Turkish company backed by China's Alibaba Group Holding Ltd late last year.
The newspaper, citing "City sources," said the online fashion retailer was approached by peer Trendyol with a potential deal that would have valued Asos at between GBP10 and GBP12 a share, triple its current price of around GBP3.79 on Monday afternoon.
The deal would have valued Asos at more than GBP1 billion.
https://www.thetimes.co.uk/article/asos-on-bid-alert-after-approach-from-alibaba-backed-rival-zgsrzbkfg
Russ Mould, investment director at AJ Bell, said the takeover approach goes to show that someone was "prepared to look through near-term problems and focus on the potential to revive the company's fortunes and put its brand back at the top of the fast fashion segment."
However, Mould said that shareholders may be frustrated that Asos didn't publicly disclose the approach.
"With the shares having slumped to GBP3.50 last week, there may be a group of investors who would be eager to accept a bid potentially three times that level," he said.
In late May, Asos announced fundraising plans in a bid to help its turnaround. The company placed a total of 17.9 million shares at 418.1 pence each. The funds raised will go towards its new agenda, which is designed to return Asos to sustainable profit and cash generation by the second half of this year.
"Takeover interest often emerges when a broken company lays out a recovery plan and there are early signs it is working. Those green shoots can give a suitor confidence it is worth making a bid now rather than waiting for the company to be repaired and then having to pay a much higher price when the risks are lower," AJ Bell's Mould explained.
However, Mould continued, Asos's half-year results, released earlier in May, were "disappointing," with losses widening and an ongoing struggle with day-to-day trading.
"It has suffered from holding too much inventory and having to slash prices to clear this stock. That goes to show its recovery plan is still in the very early stages and that it remains vulnerable to further takeover interest while the share price remains in the doldrums," he said.
For the six months to February 28, Asos said revenue declined by 8.2% to GBP1.84 billion from GBP2.00 billion a year earlier, as its pretax loss widened to GBP290.9 million from GBP15.8 million a year ago.
Shares in Asos were 8.4% higher at 379.71 pence each on Monday afternoon in London. However, the stock is down 29% in the year-to-date and 76% lower over the past 12 months.
Asos will drop out of the FTSE 250 index from Monday, June 19, having been demoted at the quarterly review last week.
By Heather Rydings, Alliance News senior economics reporter
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