12th May 2023 13:03
(Alliance News) - Shares in THG PLC tumbled on Friday afternoon after the e-commerce platform said takeover talks with Apollo Global Management Inc had been terminated.
"Investors hoping a takeover would put both them and the company's torrid existence as a public entity out of their misery will be disappointed," commented Russ Mould, investment director at AJ Bell.
The stock was 14% lower at 64.36 pence on Friday afternoon in London and is down 42% over the last 12-months.
Back in April, THG had said it received buyout interest from the US private equity firm. THG at the time noted that it was "a highly preliminary and non-binding indicative proposal" but did not disclose the terms of the proposal.
On Friday, THG said it was clear that "there is no longer any merit in continuing to engage with Apollo".
Liberum analysts Wayne Brown and Anubhav Malhotra said it was understood that both the valuation and structure of the deal were "not adequate" for THG.
Victoria Scholar, head of investment at interactive investor, said that investors were "clearly" disappointed by Apollo's decision to walk away.
"[Investors] were hoping that a [private equity] acquisition would put an end to [THG's] disastrous chapter, which has seen THG's share price slide more than 90% since January 2021," she said.
Scholar explained that the company behind brands like LookFantastic and MyProtein has struggled recently with high raw material costs, particularly for whey protein, which has squeezed its margins.
"It was also caught up in the broader 'tech-wreck' last year as the e-commerce pandemic-era boom faded and the punchbowl of cheap money was removed as central banks rushed to extinguish spiralling inflation," Scholar added.
Following the collapse of the Apollo deal, Liberum said focus would now return to what THG's guidance was pre-bid.
Liberum said, according to company-collected consensus, THG expects revenue growth of 1.5% in financial 2023 and adjusted earnings before interest, tax, depreciation, and amortization of GBP120 million.
Looking forward, Liberum said the group should also be free cash flow neutral in financial 2023, and significantly free cash slow positive in financial 2024, "driven by the focus on high-margin categories and relatively low maintenance capital expenditure."
By Heather Rydings, Alliance News senior economics reporter
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