Shareholder raises Ted Baker stake, is takeover offer more likely now?
today Dec 11, 2019
Ted Baker’s shares may be at rock bottom, with the company not having changed hands at its current price of around 347p for more than a decade. But some people still see value in the firm. The problem is that the value they’re spotting could be all about a possible takeover.
It emerged on Wednesday that Toscafund Asset Management has raised its existing shareholding to 5.9%. The company seems to have taken advantage of a share price plunge that saw the stock trading as low as 258p at one point on Tuesday on news of weak trading and a boardroom clear-out.
So what does Toscafund’s purchase mean? Well, the fund had owned less than 3% before its latest purchase and the buy could just mean that it has full confidence in Ted Baker’s recovery chances and wanted to boost its stake on the cheap.
But it could also mean that it sees Ted Baker, whose CEO and chairman left this week after what the firm said had been the "most challenging [year] in our history”, is a likely takeover target and the fund thinks it can make money from a potential bidder.
Ted Baker’s market capitalisation is currently around £155 million, despite having been over £1 billion exactly four years ago, and analysts think this increases the chances of takeover offers.
That said, such an offer needn’t come from a predatory outsider as Ray Kelvin, the brand’s founder, owns a 35% stake and so his support for any takeover would be crucial. Most likely though is that he could move to take the company private himself.
He may not succeed in convincing shareholders to sell at its current bargain basement price, but it may not take that much higher an offer to encourage them to jump ship. There had been rumours in the summer that Kelvin was putting together a bid with the firm’s now-departed senior managers.
But analysts also said that other bidders could emerge from among the retail community given the very low price of Ted Baker’s shares.
It means acting CEO Rachel Osborne has a huge challenge ahead of her as she tries to steady the firm’s operations and return it to growth while keeping an eye on what might happen bid-wise. The exec only joined as finance chief last month but made her presence felt early on by uncovering the £25 million inventory overstatement that the firm reported shortly afterwards.
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