20th May 2022 14:57
(Alliance News) - THG PLC will continue to attract deal-making interest as long as its "excessive" share price decline continues, analysts at Liberum said on Friday.
Late Thursday, the company confirmed it rejected a third non-binding takeover proposal from Belerion Capital Group and King Street Capital Management, as private equity continues to circle the business which has performed poorly on the stock market since listing in 2020.
THG said the latest proposal undervalued the retail company.
The Belerion consortium made a proposal of 170p per share for the online beauty products seller, and has until 1700 BST on June 16 to make a firm offer or pull out. Belerion is an e-commerce and technology focused private equity firm, while King Street Capital is an alternative asset manager.
Meanwhile, Luxembourg-based venture capital firm Candy Ventures, owned by Nick Candy, announced it is in "very early stages" of mulling an offer for THG.
Analysts at Liberum commented: "We have previously noted that the share price decline is excessive
and the shares remain highly undervalued. A bidder could take the company private and look to later relist in the US, where such tech companies receive much greater appreciation from investors."
Liberum rates THG at 'buy' with a 700 pence price target.
The stock was trading 25% higher at 145.84p each in London on Friday afternoon. However, it has tumbled 77% over the past 12 months.
Liberum added: "The three Key THG businesses – Beauty, Nutrition and Ingenuity - combined should
generate over GBP2 billion in sales in 2022, and if separated out, would be highly valued strategic assets in their own right which should underpin the valuation. We continue to see potential for some form of corporate activity unless the share price recovers meaningfully."
THG made its London Stock Exchange debut back in September 2020. Life as a listed company has not been plain-sailing for the company since then.
Shares floated at 500 pence each. It is currently trading 71% off its IPO price.
A capital markets day in October of last year, designed to shore up investor confidence, spooked traders instead. Since then, THG's stock has faced heavy selling pressure.
Also in October, founder and Chief Executive Matthew Moulding announced he will give up his so-called 'golden share', clearing away a corporate governance issue that has troubled investors and opening up the possibility of joining FTSE indices. The move was made "in furtherance of good corporate governance".
The share allowed Moulding to veto any takeover bid for three years. It has been unpopular with investors and blocks THG from joining the FTSE 100 or FTSE 250 indices.
AJ Bell analyst Russ Mould commented: "Various parties have been sniffing around THG after its significant share price decline since joining the stock market in 2020 at 500p per share, wondering if there was any value at the now depressed price. The company has been a horror show of an investment, with concerns about corporate governance, a lack of detailed information about the business components and a realisation that its Ingenuity e-commerce solution wasn't as special as the hype originally suggested, with plenty of other businesses offering similar services."
By Eric Cunha; [email protected]
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