Shares fall as suitors move away from online retail specialist THG

Online retail company THG saw its shares fall by more than a fifth during trading after two suitors considered bids worth more than £2bn and £1bn sterling retired from the business.

Belerion Capital, a London-based e-commerce and technology investor, and Candy Ventures Sarl, the investment firm of British billionaire Nick Candy, have both announced that they will not make offers for the e-commerce specialist.

In its own statement, Manchester-based THG, formerly known as The Hut Group, said it had received offers from “many parties” over the past few months. But none of this was acceptable.

“All recent approaches to THG have been unsolicited and, in the unanimous opinion of the board, were unacceptable and significantly undervalued the company,” the board said.

THG, which has around 10,000 staff and was valued at £4.5billion when it first floated on the London Stock Exchange in September 2020, said it had not opened its books to any suitors.

“After consulting with THG’s principal shareholders and taking advice from the Company’s advisors, the Board of Directors has not deemed it appropriate to provide due diligence access to any of these parties,” THG said.

THG manufactures and sells beauty and nutrition products through its own websites, including LookFantastic, MyProtein and Dermstore. It also operates hundreds of retail websites around the world for companies including Homebase, Nestlé, Proctor & Gamble, and Johnson & Johnson.

One of THG’s investors is Scottish entrepreneur Sir Tom Hunter. His investment group West Coast Capital first invested in The Hut Group in 2010 and currently holds a 1.39% stake – 17.26 million shares – making it THG’s 16th largest investor.

Other investors include former Tesco chief executive Sir Terry Leahy with a 1.29% stake – 16.09 million shares.

THG founder and chief executive Matthew Molding is the company’s largest investor, with a 14.69% stake.

The company has faced criticism over its governance structure, including Mr Molding previously serving as chairman and chief executive.

Mr Molding also previously held a controversial ‘preferred share’ in THG, which allowed him to veto any takeover bids but also prevented the company from joining the FTSE indices.

This has confused investors, along with concerns about future prospects, and in 2021 THG has lost over £2bn of its market value.

Mr Molding divested his gold share in October 2021 and in March this year THG hired former ITV boss Charles Allen as non-executive chairman.

In May, THG announced that it had rejected a £2.1bn approach from a consortium led by Belerion and King Street Capital Management, a New York-based alternative asset manager.

Under UK Takeover Panel rules, potential bidders had until 4pm on Thursday June 16 to make a formal offer on THG or walk away.

Belerion Capital said so and King Street Capital had no intention of making an offer for THG. Candy Ventures, which was reported last month to be considering a £1.4bn bid for THG, has also confirmed that it has no plans to make a bid.

THG said it was “clearly aware” of the broader macro challenges, but the business continued to “perform well and in line with its own expectations”.

During its annual results in April, THG said revenue in 2021 was up 35% on the previous year to £2.18bn, while pre-tax losses narrowed to 186, £3m from £534.6 previously. But shares at the time fell sharply after the company warned that profit margins for the year would be lower than expected.

THG also said the war in Ukraine, Covid-19-related lockdowns in Asia and inflationary pressure in nearly every cost line meant 2022 would be tougher.

Mr. Molding earned his CPA degree from Arthur Andersen and was previously CFO of the distribution division of telecommunications company The Caudwell Group, founded by Phones 4U entrepreneur John Cauldwell.

Anne G. Cash