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March 28, 2022

Ted Baker rejects Sycamore GBP250m takeover bid

UK high street fashion chain Ted Baker has rejected two proposals from private equity firm Sycamore Partners, noting both bids significantly undervalue the company.

By Beth Wright

Ted Baker confirmed it has received two unsolicited non-binding proposals from Sycamore Partners in relation to a possible cash offer for the entire issued and to be issued ordinary share capital of the company this morning (28 March).

The first proposal would have seen Sycamore offer 130 pence for each Ted Baker share. Following the Ted Baker board’s rejection of the bid, Sycamore submitted a revised proposal under which it would offer 137.5 pence, marking an increase of 5.8%.

The bid, which is worth about GBP254m, according to a report published by The Independent, was also rejected.

“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.”

Ted Baker added there can be no certainty that any firm offer for the company will be made nor as to the terms. It urged shareholders to take no action at this time.

Eleonora Dani, equity research analyst at Shore Capital, notes the prices offered are “considerably below” Ted Baker’s value.

“Ted shares are up c.27% since the private equity firm confirmed to be in the process of making an offer on 18 March, but we would agree with the board that both offers do not reflect the health of the Ted brand equity. The question is, at what premium would investors consider a potential bid, noting that shares are up 10% over the past year. Despite inflation set to squeeze discretionary spend, we see Ted Baker in a stronger position than other competitors, ready to capitalise on the ‘return to normal’ trends post-pandemic.”

She adds the company is also on track to deliver targets, pointing to its fourth-quarter trading update in which it confirmed to be on track to meet FY23 targets.

“The brand has been criticised for relying on instinct rather than data to make decisions in the past. Still, it is increasingly moving towards better use of data to derive its strategy,” Dani says. “The intel gathered by the company shows that Ted is a brand naturally differentiated and recognisable, and both characteristics come with a critical appeal to consumers. Ted is also positioned as a British lifestyle brand with a very accessible price point in the luxury goods space, and the price positioning gives it a highly competitive stance.”

The news comes after Sycamore said earlier this month it was mulling a takeover of the UK high street fashion chain.

In its pre-close trading update for the 12-week period to 29 January last month, Ted Baker hailed accelerating sales growth, with sequential improvement in the face of Omicron headwinds.

Group sales were up 35% compared to the fourth quarter of last year, and increased 18% on this year’s third quarter. Compared to fourth-quarter pre-pandemic levels, retail sales were running at -10% before Omicron warnings, falling to -42% during the Omicron surge.

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