THG takeover talk emerges with PE groups potential suitors

Manchester online retail giant THG could be the target of a private equity takeover.

Reports claim Advent International and Leonard Green are circling the group, which has seen its share price and market capitalisation slump in the past year.

Executives from Advent are said to have visited THG’s HQ recently in relation to a possible buyout.

Shares in THG jumped 16% last Friday, but today (February 7) they were back towards their lowest point of 122.60p per share, reaching 125.39p shortly before 10am, having opened the day at 135.40p per share.

But by the close of trading they had recovered to 140.71p per share, a 3.92% improvement on the day.

When THG floated in September 2020, at 500p-per-share, it was the City’s largest listing since 2013, and its stock rose to trade at nearly 800p at the start of last year, when its market capitalisation got close to £10bn.

When the stock exchange closed on Monday the group was valued at £1.72bn.

Its woes can be traced back to a disastrous investors day in October last year which saw the start of the share price slump on the back of investor scepticism

Although co-founder and chief executive, Matt Moulding, gave up his ‘founder’s share’ to appease the markets, the slide has continued.

Mr Moulding claims the decline is due to hedge funds and stockbrokers conspiring to drive down the group’s share price, and last month he submitted a dossier to City regulator, the Financial Conduct Authority (FCA), with evidence he said proves this.

The FCA is conducting an investigation into trading in THG’s shares following the huge fall in value.

Russ Mould, investment manager at Manchester investment platform AJ Bell, said THG is vulnerable to bids.

“We are beginning to see one of the after-effects of the recent market correction feed through. Those businesses which have been particularly badly beaten up are now looking vulnerable to opportunistic bids and the speculation is starting to mount.”

He cited THG, and exercise bike maker, Peloton, as potential targets.

“While the initial hype around these businesses may have added too much to their respective share prices as perceived beneficiaries of lockdown, now that froth has cleared there could be some substance to talk of bid interest.”

He added: “THG has a powerful founder in the form of Matt Moulding, and he may resist private equity predators and potentially even take the business private as he has reportedly threatened to do in recent months.

“Moulding has not reacted well to the slings and arrows that most people would accept are the price of being a public company – with an investor day which went down about as well as a bucket of cold sick last year, prompting him to indulge in claims of conspiracy.

“The market has grown increasingly sceptical about the prospects for its Ingenuity platform which was initially perceived as the big growth engine of the group, selling e-commerce solutions to third parties.

“However, THG still has a valuable collection of its own nutrition and beauty product sites which are clearly interesting enough in their own right to suitors.”