New York-based private equity group Sycamore Partners is considering an offer for UK clothing company Ted Baker, prompting shares in the fashion chain to soar.
Sycamore, which specialises in investing in retail and consumer businesses, said in a statement on Friday that it was “in the early stages of considering making a possible cash offer for Ted Baker”, although it added that “there can be no certainty that an offer will ultimately be made”.
The firm has until April 15 to decide whether to bid. Sycamore has about $10bn of capital invested in companies, including US office supplies group Staples.
Ted Baker said in response that “it has not received any approach from Sycamore”, adding that its board is “confident in the company’s independent prospects”.
“The board . . . would evaluate any offer for the company against the strong shareholder value creation that it believes can be delivered as a standalone company,” the company said in a statement.
Ted Baker’s shares added around a fifth to their value in early London trading on Friday, swinging their gains for the year into positive territory as analysts welcomed the possibility of the purchase.
“It looks like someone might bring an end to Ted Baker’s horrific time as a listed company,” said Russ Mould, investment director at AJ Bell, noting that the company’s share price lost half of its value between September 2021 and February this year.
Ted Baker, which had a market capitalisation of about £180mn before the offer was made public, struggled during the pandemic and lockdowns because more than a third of its stores were located in large cities and shopping centres.
Losses ballooned and forced the retailer to respond with heavy discounts. Revenue began to rise again last year and the company recorded sales of £199.3mn in the 28 weeks to August, an increase of 17.6 per cent, chalking up a pre-tax loss of £25.3mn.
“[The latest figures are] encouraging but the market has yet to be won over by the numbers, so Sycamore must be putting a lot of faith in the company’s turnround potential,” Mould said.
He added that as households grapple with rising inflation and living costs, retailers could face major headwinds in the future.
Ted Baker appointed Rachel Osborne as chief executive in 2020 and launched a turnround plan after a number of profit warnings. It has since focused on refreshing its brand, which was known for its formalwear, and worked at boosting its online presence. A pandemic shift in clothing tastes has prompted it to offer more casual options.
Sarah Riding, retail and supply chain partner at law firm Gowling WLG, said that while a sale was not yet certain, interest from Sycamore pointed to opportunities for overseas expansion.
Ted Baker was founded in 1988 by Ray Kelvin, who drove the company to achieve £640mn of annual sales at its peak with a valuation of £1.4bn.
Kelvin resigned in 2019 after allegations of inappropriate behaviour, which he denied, but he still plays an advisory role at the company following an agreement signed in 2020.
Numis Securities is acting as Sycamore’s financial adviser on the potential deal.
