Fashion chain Ted Baker has seen its share price boom after kicking off a formal sale process, with a third US private equity proposal.
Analysts said the proposal comes as valuations of British companies have fallen in the wake of the pandemic and Brexit.
Ted Baker has received an improved proposal from Sycamore, in addition to another unsolicited third party bid, it revealed on Monday.
Ted Baker’s share price was lifted more than 14 per cent on Monday afternoon, in the wake of the announcement.
The UK high-street retailer has previously turned down two takeover proposals from the New York-based Sycamore, claiming its most recent £250m bid “significantly undervalued” the firm.
“In view of the interest expressed by potential offerors, and having consulted its major shareholders, the board has decided to conduct an orderly process to establish whether there is a bidder prepared to offer a value that the board considers attractive relative to the standalone prospects of Ted Baker as a listed company,” a statement read.
However, analysts have warned there may be a disconnect between the valuation Ted Baker regards itself as holding and the sum a third party bidder is willing to cough up for it.
As with several of its high street rivals, the chain was hammered hard by the pandemic, particularly as a chain that had made a name for its occasion-wear. It swallowed a revenue loss of £278.5m in the year to 30 January 2021, down 44 per cent as it bagged £352m in total.
However, Ted Baker has recently reported boosted brand sales, with the company reporting sales up 23 per cent to £433m year-on-year last autumn.
A brighter outlook comes amid a three-year turnaround plan headed by chief executive Rachel Osborne, which has seen footfall return to the chain’s 560 stores and concessions.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said it was possible the unnamed bidder was another overseas private equity firm as interest in UK firms had hit a “fever pitch”.
She added: “The price that Ted Baker will accept from a buyer is clearly more ambitious than what the existing bids offer. Ted is keen to point out the potential growth for the brand, including around the benefits of a new leaner, more digital operation. There may well be a disconnect between Ted Baker’s valuation of itself and the amount a third party is willing to spend on an improved, but nevertheless struggling, bricks and mortar retailer.”
The brand’s stubbornness to ensure it agrees right price was praised by Gowling WLG’s Sarah Riding, who said the interest had helped to demonstrate “the clear resonance it still holds with consumers.”
However, Riding warned that whichever firm succeeded in the bidding war would “have a challenge ahead in terms of maximising its potential through new product lines, online revenue streams and even overseas market penetration and expansion in a revitalised post-pandemic setting.”
“However, while attracting a buyer for this purpose is important, questions around the brand’s continuation and enhancement here in the UK will doubtless be front of mind for the current owners,” she added.
Ted Baker did not disclose the terms of Sycamore’s latest bid for the company. However, it previously turned down a bid for 137.5 pence for each Ted Baker share.
Firms hoping to woo Ted Baker are not obligated to name themselves publicly after the takeover regulator has given the green light for a formal process.