Ted Baker shares lift on takeover offer

Ted Baker has turned down two buyout offers from private equity group Sycamore. Shares in the men’s fashion retailer have jumped 48% in the past week from 88p to 130p on takeover speculation. Management revealed that it had turned down two bids from the New York-based firm. The first on March 18th valued Ted Baker shares at 130p, while the second on March 22nd offered 137.5p a share or a total of £224m.

Ted Baker said the bids “significantly undervalued” the retailer and “failed to compensate shareholders for the significant upside that can be delivered by Ted Baker as a listed company.”

“Ted Baker is a leading global brand with a strong future,” the company said in a statement. “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.”

Other retailers on Sycamore’s shopping list

It’s also rumoured that Sycamore has looked at chemist chain Boots, owned by Walgreens. Bloomberg recently reported that the private equity firm was also considering a bid for US department store Kohl’s. Sycamore previously owned Nine West and Kurt Geiger. It has until 15th April to make a further bid.

"The retailer has been through a prolonged difficult period and was just starting to see the first fruits of its recovery strategy,” said Russ Mould, investment director at AJ Bell. "Selling out now would mean letting someone else come in and steal all the credit for the turnaround plan."

Turbulent times at Ted Baker

Ted Baker has had a rough time of late. The shares have lost 95% of their value over the past three years after a number of blunders. These include an accounting scandal, profit warning and the resignation of founder Ray Kelvin in 2019 after allegations of inappropriate behaviour, which he denies. This is all on top of the effects of the Covid-19 pandemic.

Current CEO Rachel Osborne has embarked on a turnaround programme in an attempt to revive the retailer’s fortunes. Debt has been trimmed and it has boosted its online offering. The recent interim results were encouraging, with Ted Baker returning to sales growth.

Group revenues rose 17% to £199m in 2021 from £169.5m in 2020, while pre-tax losses fell by 70% to £25m. Gross margins improved by 250 basis points and sales in the second-quarter were up 50% on the previous year. Osborne says the new e-commerce platform is also on track.

“I’m pleased with the continued progress we’re making, as we return to revenue growth, and make big strides back towards profitability,” Osborne told investors at the half-year results. “The brand remains healthy, delivering a stronger full price mix alongside encouraging early reactions to the new collection. The pandemic continues to impact the global retail environment, yet despite this we are delivering against our Transformation Plan.”

However, the environment for retail remains difficult, given rising inflation and energy prices and the spike in the cost of living. It’s hard to know whether Sycamore will up their offer or if another suitor could appear. For now, the shares look worth holding onto in case of renewed bid interest.

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