ABG to buy Ted Baker for £211m, will restructure firm and target US growth
Ted Baker and Authentic Brands Group announced on August 16 that ABG will be buying the British fashion retailer after all. The news came after Ted Baker had announced back in June that its “preferred bidder” – which had been assumed to be ABG – had decided not to go through with any acquisition.
The sale will need to get shareholder approval but holders of a majority of the shares have already backed it and it’s likely to complete in Q4.
Once signed, sealed and delivered, it looks like there will be big change ahead for Ted Baker with a major push into the North American market, and a restructuring that could go full steam ahead into a licensing model.
More of that later. For now, what are the details of the deal?
The acquisition-hungry American group said its newly incorporated and wholly-owned entity ABG-Robin BidCo (UK) Limited has agreed with Ted Baker on a final cash offer for the whole company of 110p in cash for each share.
That values the UK-based business at around £211 million ($254m) and is a more-than-18% premium to the share price at market close on August 15.
In some ways that’s good news. The share price has been even lower in the past, dropping below 70p in the wake of the devastation caused by the pandemic-linked stock market crash back in 2020. However Ted Baker shares changed hands for more than £1.50 each this spring and in late 2015 they were almost £29 each, so the current valuation of £211 million is tiny in comparison.
But in the current tough economic circumstances, it seems like a good deal. And ABG said the price is “final”, except that it reserves the right to improve or revise it if a third-party bidder steps into the fray.
The directors of Ted Baker said they consider the terms of the acquisition “to be fair and reasonable” and “intend unanimously to recommend that shareholders vote in favour”, as they’ll be doing with the shares they themselves control.
So what does ABG see in Ted Baker, a brand that has wide appeal but that has also seen its fair share of problems in recent years as the declining share price shows?
It believes “Ted Baker is a distinctive British lifestyle brand with a rich, authentic heritage and strong worldwide customer recognition. As a leading global brand management company, ABG believes it will be a good custodian of the brand and is well positioned to accelerate its growth and enhance its value”.
BIG CHANGE AHEAD
The group added that it “intends to use its global network of established operating partners with deep industry expertise, together with its business model that combines leading brand management capabilities, to enhance Ted Baker's revenue and profitability across merchandise categories and geographic regions as it has for other acquired brands including Reebok, Brooks Brothers, Nautica, and Eddie Bauer.”
ABG thinks the company “is better suited to private ownership, as this will facilitate a restructuring of the business in order to maximise its future potential.”
And that restructuring will be a big move. Post-acquisition, it will separate the Ted Baker business into two strands. There will be an intellectual property holding company that would be controlled by ABG. And there will also be one or more operating companies that would manage the physical retail, e-commerce and wholesale operations of the Ted Baker business.
It intends to “explore options to transfer full or partial ownership and control of some or all of such operating companies to partners with established operating businesses”.
It especially thinks the label has “significant growth opportunities in North America given the Ted Baker brand's strong consumer recognition in this market”.
ABG owns 50% of SPARC Group LLC, a North American retail, e-commerce and wholesale operating joint venture. The other owner is malls giant Simon Property Group. SPARC operates around 1,660 stores in North America and has substantial e-commerce and wholesale activities.
It seems likely that one of the options ABG may explore is “the potential to enter into formal discussions to seek to combine Ted Baker operations in North America with those of SPARC”.
ABG chief Jamie Salter said: “Ted Baker is a highly regarded, uniquely British brand whose strong fashion credibility resonates with consumers around the world. We are excited to build on the brand's global foundation through a business model focused on licensing, wholesale, retail, digital and strategic marketing partnerships. Under ABG's ownership, we believe that Ted Baker is poised for continued growth and success.”
And Ted Baker’s interim chair Helena Feltham added: “In April 2022, after receiving a number of unsolicited bid proposals and having consulted with our major shareholders, the Ted Baker board decided to launch a formal sale process to evaluate interest in the business. The process was thorough and attracted global interest.
“The board believes the offer, which is supported by Ted Baker shareholders with a majority of shares, represents a fair value for shareholders and balances the company's growth prospects with the risks of the uncertain economic environment in which the business is operating.”
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