Manchester-headquartered eCommerce giant THG has rejected a bid from US private equity giant Apollo Global and ended discussions.
THG announced on April 17th that it had received a proposal from Apollo to buy it and entered into a period of consultation.
However, in a statement to the Stock Exchange today, the eCommerce giant said there was ‘no longer any merit in continuing to engage with Apollo’ based on ‘inadequate valuations’.
THG’s chair Charles Allen, said: “THG’s board, in accordance with its fiduciary obligations and as demonstrated with its recent engagement with Apollo, will always give due consideration to all potential options which provide the opportunity to maximise value to THG’s shareholders.
“The board remains fully confident in THG’s strategic direction and long-term prospects as an independent company. As stated in our recent results, with a strong balance sheet and category leading positions within substantial global end markets that continue to benefit from long-term structural growth, we have confidence in our ability to deliver long-term value for shareholders and remain on track to be cashflow positive in 2024.”
Following the news THG’s founder Matt Moulding took to LinkedIn to explain the decision.
“Today THG announced that we’ve rejected a bid from US PE giant, Apollo Global, and ended discussions,” he wrote. “Why? Just about every major PE firm has enquired about taking THG private. Usually, nobody finds out. But if there’s a leak, then the Takeover Panel forces an announcement. This is what happened with Apollo.
“PE interest isn’t surprising. For the three years before IPO, THG shares traded at £3. Having doubled in size we then listed THG at £5 a share. They rose to £8 in the first-year post IPO but, after the Numis-ed short attacks when they weren’t made a broker to THG, shares fell to as low as 30p in late 2022.
“The last time THG shares traded at 30p was in 2009, when the group had £80m sales and only sold CDs! Today THG is 28x bigger and we haven’t sold CDs for years.
“PE firms usually want majority ownership. We’ve been clear: don’t bid if you want 51 per cent, plan to use debt to leverage up, or won’t allow existing shareholders to stay invested. This rebuffs most PE firms.
“c65 per cent of THG shares sit with me and several long-term shareholders. Our LSE pain comes from the 35 per cent of ‘fast money’ shares actively trading. I’ve personally spent £39m since IPO, increasing my stake and reducing THG shares on the market. The most recent being £5m at 39p in late 2022.
“Yes, it’s unpleasant being listed in London. But I’ve spent 20 years building THG, from an idea while sat on my sofa, into a global group with sales of £2.2bn. We’ve just completed a vast expansion of our tech and global infrastructure. We’re just getting going.
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“It’s well known that PE deals are lucrative for management. THG would be worth billions more away from the daily market manipulation involving bankers, hedge funds and pundits.
“PE typically give management 10 per cent of the company as an incentive, with 5 per cent to the CEO. These incentives are worth hundreds of millions to staff. PE can be compelling.
“Like with all previous bidders, the Apollo bid wasn’t right for THG. Yes, it allowed existing shareholders to stay invested, with me continuing to run the group. But Apollo also wanted PE controls, particularly across beauty and nutrition where they asked for controlling equity rights.
“Like all previous bidders, Apollo were told their bid valuation and structure was unacceptable. Yesterday Apollo set out how they could raise their bid further, ahead of a deadline set by the Takeover Panel. Their latest view on Ingenuity had it as being significantly more valuable than the whole of THG the day before the bid leaked!
“No shit! Ingenuity is great. But neither Apollo’s bid price, nor the structure proposed, are in the best interest of THG. Myself, Charles and the board, supported by>50 per cent of shareholders, all agreed on that.
“And so, the Apollo bid was based upon smart financial engineering, capitalising on a wildly low share price from THG being on the LSE. I get excited about building and growing things, not spreadsheets.”
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