Why Did This Struggling British Brand Turn Down Two Takeover Bids?

Why Did This Struggling British Brand Turn Down Two Takeover Bids?

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While Ted Baker  (TBAKF)  has had a challenging few years, that doesn’t mean it’s ready to throw in the towel — and it said as much on Monday.

The British fashion brand just shot down a second takeover proposal from private equity firm Sycamore Partners Management. 

On Monday (March 28) afternoon, Ted Baker revealed that the New York-based retail-focused private equity firm had made two unsolicited offers to take over the struggling designer whose shares had fallen more than 90% in the last five years. 

One offer tendered 130 pence ($1.70) a share on March 18, and another for 137.5 pence ($1,80) a share on March 22.

Both were too low, the brand said.

Sycamore works with around $10 billion in capital from different retail and consumer brands and had valued the company at 253.8 million pounds or $333.65 million.

‘People Aren’t Buying Party Wear’ Is A Myth

While the British designer has struggled with falling sales and the need to discount heavily to make up for them during the pandemic, it has since shown some signs of recovery as people emerge from the pandemic and buy more party and office clothing.

The company’s shares are up 15.20% year-over-year.

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Sycamore’s proposals, the company initially told Reuters, did not “compensate shareholders for the significant upside that can be delivered by Ted Baker as a listed company.” 

In other words, they considered the offers to be too low for the company’s potential.

This indicates that Ted Baker is confident in its ability to revive the brand and bring back sales going forward. 

That could be true: Between the end of 2020 and 2021, clothing sales increased by 21.9%, and the kind of “party” and “dress casual” in which Ted Baker specializes saw particular boosts in sales.

“It’s unsurprising that management’s not keen to give up the reins after a few difficult years,” Hargreaves Lansdown Equity Analyst Laura Hoy told Reuters.

Can Ted Baker Make A Comeback (Without A Takeover)? 

It is not yet clear whether Sycamore will make a third offer but it has until April 15 to make a definite offer. 

Upon news of the turned-down offer, Ted Baker shares were down 4.24% at 120.85 pounds ($158.30) at close on Monday.

While fashion stocks have been somewhat difficult to predict during the ebbs and flows of the pandemic, Ted Baker said that it is confident about being able to revitalize the brand.

“Ted Baker continues to make good progress with its transformation and the company is emerging from Covid as a stronger and more financially sustainable business,” the company said in a statement.

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