After rejecting two unsolicited bids, Ted Baker PLC (LSE:TED) has seemingly performed a u-turn and initiated a formal sales process.
Its statement today pointed out that in the week that has passed since the last offer from Sycamore Partners, it has received not only an improved bid from Sycamore but an additional unsolicited third-party bid.
An educated guess might suggest the new bids are much closer to the board’s own valuation and as such, they have opened the floor to other potential suitors as it looks to squeeze as much value as possible.
What’s happened so far?
As mentioned previously, the London listed company rejected two bids from Sycamore, with the most recent bid that was made public worth 137.5p per share, just shy of £200mln.
The offers were rejected on the basis that “they significantly undervalued Ted Baker and failed to compensate shareholders for the significant upside that can be delivered,” according to a statement released last week.
Initiating the formal sales process would therefore indicate that the board is warming to the idea of a sale.
What happens next?
From this point, it’s all about filtering through any bids that come in from interested parties.
The first phase will involve bidders being invited to submit non-binding indicative offers to Evercore and Blackdown, the company’s financial advisers, based solely on information already in the public domain.
Those initial bidders will then be narrowed in the next phase, with parties still involved expected to enter a non-disclosure and standstill arrangement with Ted Baker, before the next phases of the sale start.
What is the most likely outcome?
As things stand, there are three possible outcomes.
Firstly, no bid is accepted, and Ted Baker remains in the hands of the current shareholders, with founder and former chief executive Ray Kelvin owning 12% of the business, making him the third-largest shareholder.
Secondly, a management buy-out is completed, where the leadership team purchases the operations and assets of the business.
And finally, and the most likely outcome, is an outright sale, according to analysts.
Russ Mould, an investment director at AJ Bell, adds that it “looks like Ted Baker’s plan is to try and get the best possible office price from any bidder.”
“The formal process may flush out other bids and then management and shareholders alike will know exactly where they stand in terms of who is bidding anyhow much they are offering.”
John Stevenson, a retail analyst at Peel Hunt, went further to argue just how far current management can take the company if it wants to reach the share price heights of 2015.
“Ted Baker has operationally delivered, and the underlying recoveries are fantastic, so from a structure point of view it has been very successful,” Stevenson added.
However, he believes it will take at least a few years to get back to where it wants to be with “growth to be quite protracted,” which opens the door further for a sale.
“If you’re confident you can take the business and you’ve got confidence in your ability to deliver that’s fine, especially as the Ted Baker brand isn’t damaged in any way, shape or form.”
With at least two suitors and the board and shareholders seemingly interested, a sale looks increasingly like the eventual outcome.