Fashion chain Ted Baker has rejected a £250m takeover bid from New York based private equity firm Sycamore.
The US firm had tabled a £250m offer for the chain last week, it was reported by Sky News at the weekend.
The London-listed retailer confirmed it had rejected two non-binding proposals from Sycamore regarding a possible cash offer.
Ted Baker rejected an initial proposal where Sycamore would offer 130p for each Ted Baker share on 22 March.
A revised proposal, for 137.5 pence for each Ted Baker share, was also rejected, the firm revealed in a Monday morning update on the London Stock Exchange.
The proposals were deemed to have “significantly undervalued” Ted Baker and “failed to compensate shareholders for the significant upside that can be delivered by Ted Baker as a listed company”, its board concluded.
A statement from the firm added: “Ted Baker is a leading global brand with a strong future. 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 retailer was eyeing delivering value for shareholders “well in excess of the price offered by Sycamore,” it said.
Now, the US private equity firm must decide whether to raise its bid before the UK Takeover Panel’s deadline next month or ditch the deal.
Shares plunged more than five per cent in early trading on Monday trading and fell further to minus seven per cent by the afternoon.
The value of the Glasgow-founded company has shrunk in recent years, closing on Friday with a market capitalisation of £233m, versus a valuation of £1.4bn in its heyday.
Laura Hoy, equity analyst at Hargreaves Lansdown, said it was “unsurprising” that Ted Baker bosses were hesitant to relinquish control after a tough few years.
“We’re finally starting to see some green shoots from the group’s turnaround efforts now that formal occasions are back on the social calendar. However there’s still a bumpy road ahead with inflation weighing on customers’ willingness to shell out for a new outfit,” she added.
With prices on the higher end of the spectrum, but not quite a luxury brand, Hoy said the retailer “could start to slide down the value chain” as its customers feel the bite of the cost of living crunch.
She continued: “On Sycamore’s side, the deal makes sense given the group’s stable of investments include a variety of American fashion brands similar to Ted. But as there’s still a lot of work to be done and as Ted turned its nose up at a relatively steep premium, it’s unclear if another offer could be coming.”