Ted Baker has recommended a £211mn cut-price takeover offer from US group Authentic Brands despite rejecting the UK fashion brand’s previous approaches as “inadequate” in most valuations.
The US group, which owns businesses including Authentic Brands, Reebok, Nautica and Eddie Bauer, is offering 110p a share in cash for the company, which was valued at more than £1bn just four years ago.
Ted Baker shares rose 16 percent Tuesday morning.
UK group directors said the bid “represents fair value for shareholders and balances the company’s growth prospects with the risks of the uncertain economic environment in which the business is operating”.
This includes “the potential for an extended period of recession in the UK”, he added. Official Brands warned that store closures and headcount reductions cannot be ruled out at the company.
The proposal has been backed by the majority of Ted Baker’s shareholders, including founder Ray Kelvin, value investor ToskaFund and fund managers Schroders and Oasis, who together own 50.7 percent of the capital. The acquisition will be executed as a scheme of arrangement requiring approval by three-quarters of the shareholders.
The formal sale process began in April when Ted Baker rejected a 137p a share approach from private equity group Sycamore.
Authentic Brands was at one point the company’s preferred bidder during that process, but a “deterioration in the broader macroeconomic environment” ended its interest.
Ted Baker and its advisors resumed discussions with other parties but Authentic Brands subsequently submitted a revised proposal, which they determined was “the most attractive and deliverable proposal to Ted Baker and its shareholders.”
That represents an 18 percent premium to Monday’s closing price and 11 percent over the share price before the takeover process began.
Authentic Brands described Ted Baker as a “distinctive British lifestyle brand with a rich, authentic heritage and strong worldwide consumer recognition” and said it would use its worldwide network to drive sales.
It intends to split the group into a company that owns intellectual property, which it controls, and various retail, wholesale and ecommerce operating companies that can be transferred or sold to partners.
Although Authentic Brands stressed its intention to maintain Ted Baker’s London headquarters as the hub of its design teams, the “evolving macroeconomic situation” means it “needs to be nimble” and “adapt its operational strategy”.
It noted that it integrates Ted Baker’s research and development activities or its corporate headquarters with operating partners. It plans to “review the retail footprint” in the process leading to store closures.
It said there are “significant growth opportunities” for the brand in North America, where Authentic Brands owns half of a joint venture with mall owner Simon Property Group. Ted Baker’s US operations accounted for a quarter of sales in the most recent fiscal year.
The takeover comes after Ted Baker floated the London market for a quarter of a century and completed a fall from grace that began in 2019, when Kelvin was forced out of the business after allegations of inappropriate behavior towards staff. He has always denied any impropriety.
Their longtime finance director, Lindsey Page, left less than a year after taking over from Kelvin as chief executive, following sales declines and the discovery of accounting errors.
The company has been hit by extended store closings and discounts due to the pandemic, and by the untimely death of former chairman John Barton, who was installed to rebuild the board after the departure of Kelvin & Page.