28th Mar 2022 08:49
(Alliance News) - Ted Baker PLC on Monday laid out its case for rejecting a pair of takeover approaches from a private equity firm, with the fashion retailer saying its business is on "firm footing".
The company said the takeover tilts by Sycamore Partners Management LP undervalue the company. The firm, backing its future as a publicly-listed company, said it is focused on "delivering value for Ted Baker's shareholders well in excess of the price offered by Sycamore".
Ted Baker confirmed it received, and rejected, two proposals from Sycamore. The first offer was for 130 pence per share on March 18.
That day, Sycamore confirmed it was in the early stages of considering a "possible cash offer" for Ted Baker. It did not at the time disclose a price for the potential takeover tilt. Ted Baker also that day had noted Sycamore's announcement but said it had not yet received an approach from the private equity firm.
On Monday, Ted Baker said a second offer then arrived four days later at 137.5p per share.
Shares in the company were down 3.3% to 122.03p each in London on Monday morning. It has a market value of GBP225.1 million.
Ted Baker backed its strategy on Monday, as it looks to re-emerge from a difficult few years.
"The board of Ted Baker carefully reviewed both of Sycamore's proposals with its advisers and concluded they significantly undervalued Ted Baker and failed to compensate shareholders for the significant upside that can be delivered by Ted Baker as a listed company," the company said.
"Ted Baker is a leading global brand with a strong future. The management actions taken over the last two years have put the business on a firm footing, and it is now well on the way to recovery following a turbulent period. The board is focused on delivering value for Ted Baker's shareholders well in excess of the price offered by Sycamore."
Founder Ray Kelvin departed as chief executive in early 2019, following a leave of absence in December 2018, after he was accused by Ted Baker staff of forced "hugging" and inappropriate touching and comments.
More upheaval at the top followed when Kelvin's replacement Lindsay Page resigned in December 2019. That same month, David Bernstein stepped down as chair.
It was a role Barton held until his death in December of last year.
Sharon Baylay was named as acting chair, before John Barton took over as chair in July 2020.
Ted Baker, now under the leadership of CEO Rachel Osborne, back in February reported robust sales growth and improved margins in its fourth-quarter. Sales in the quarter ended January 29 increased 35% compared to the same period a year before.
Ted Baker added that trading margins improved over 350 basis points across all channels.
It was a sign the retailer's fortunes could be back on the up following a difficult period.
Hargreaves Lansdown analyst Laura Hoy commented: "It's unsurprising that management's not keen to give up the reins after a few difficult years. We’re finally starting to see some greens shoots from the group's turnaround efforts now that formal occasions are back on the social calendar."
Hoy added: "However, there's still a bumpy road ahead, with inflation weighing on customers' willingness to shell out for a new outfit. Ted's prices are on the higher end of the spectrum, but not quite reaching into luxury, meaning its customers won't be immune to the cost of living squeeze and could start to slide down the value chain. The best of Sycamore's offers reflected a 9% premium on Ted's Friday closing price, so it's a nod of confidence from management that they think they can deliver something better."
Sycamore specialises in retail investments. Its portfolio currently includes Massachusetts, US-based office products and workplace supplies retailer Staples.
By Eric Cunha; [email protected]
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