The online retail tech company THG has joined a string of mid-sized British companies at risk of being swallowed by private equity, as its shares were sent soaring by a takeover approach from the US investor Apollo.
THG’s share price closed up 45% on Monday at 95.8p after it revealed the approach in a statement to the stock market. It was valued at £860m on Friday before the offer was revealed.
The online shopping group, which was formerly known as the Hut Group and whose largest shareholder is its founder, Matthew Moulding, gave no details about the offer other than saying it was a “highly preliminary and non-binding indicative proposal”, and that there was no guarantee a firm offer would be made.
The approach was the latest in a series of bids for British companies by foreign private equity firms, with Britain seen as “ripe for takeovers”, according to one analyst.
The oilfield services company John Wood Group jumped after it said it was also open to takeover talks with Apollo, while the Middle East and Africa payments company Network International said it would probably recommend an offer by Francisco Partners and CVC, two more private equity firms, which are based in the US and Luxembourg respectively.
Other recent targets for foreign takeovers include veterinary drugs company Dechra Pharmaceuticals, which was targeted by the Swedish private equity firm EQT last week, the property investment company Industrials REIT, which on Friday agreed to a takeover by the US investor Blackstone, and the events company Hyve Group, which last month agreed a deal with the US firm Providence Equity Partners.
British investors have been concerned for several years that UK companies are vulnerable to takeover by foreign firms because of a weakening exchange rate. The pound was worth more than $1.45 in June 2016, shortly before the vote to leave the EU, but in September it plunged to a record low of $1.0327 after Liz Truss and Kwasi Kwarteng’s disastrous mini-budget.
Sterling has since recovered to $1.24, but that still represents an historically low level, meaning foreign investors’ money will go further.
Victoria Scholar, the head of investment at Interactive Investor, said there had been a “flurry of private equity M&A activity” targeting UK companies.
“There is a sense among international investors that the UK is ripe with takeover targets,” she said. “The recent rebound for the pound suggests opportunistic buyers need to make the most of sterling’s weakness before it appreciates further and is too late.”
Separately, the Japanese video game maker Sega Sammy said it had agreed to buy Rovio Entertainment, best known for the Angry Birds mobile games. Sega, which makes the Sonic the Hedgehog series, said it would buy the Finnish company for €706m (£625m).
THG floated on the London Stock Exchange in autumn 2020 at the height of the investor mania after the first Covid-19 lockdowns. THG raised £920m in the listing, as it hoped to become a dominant player in providing technology to well-known brands that want to sell their products direct to consumers online.
However, it has struggled since then, with disappointing sales and criticisms of its governance. Its market value had plunged by 90% from its peak before the takeover approach.
Wood’s share price rose by 7.5% in early morning trading on Monday to 227p, still short of the 240p price offered by Apollo. The company was valued at £1.5bn at the end of trading on Friday.
Wood has rejected four offers from Apollo, but it said it would discuss a final offer after talking to its shareholders, in a statement to the stock market on Monday.
The UK’s Takeover Panel has approved a one-month extension to the time by which Apollo must announce its firm intention to make an offer under its rules.
Wood’s board said it “remains confident in Wood’s strategic direction and long-term prospects”, but said it had decided to engage with Apollo on the terms of a takeover after “feedback received from Wood shareholders”.
Meanwhile, Network International’s share price soared by 20% to 363p, short of the 387p offered by CVC and Francisco Partners.
Network International said it was minded to recommend the offer by CVC and Francisco Partners, after rejecting a series of earlier bids. The bidders will now be granted access to information for due diligence, with a deadline of 11 May to make a firm offer.