Ted Baker shares surge 21% amid possible takeover bid

UK clothing brand Ted Baker (TED.L) shot into fashion with investors on Friday, jumping as much as 21% on the day, after Sycamore Partners said it was considering a takeover bid.

The New York private equity firm, which has previously owned brands such as Kurt Geiger, said in a brief statement that consideration of a cash offer was still at an early stage.

It comes amid wider interest in British entities from the US, while the UK’s departure from the European Union has reduced valuations.

However, the retailer said it had not yet received a formal approach from Sycamore, and urged shareholders not to take any action.

“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.

“The board is confident in the company’s independent prospects and would evaluate any offer for the company against the strong shareholder value creation that it believes can be delivered as a standalone company.

“There can be no certainty that any firm offer for the company will be made nor as to the terms on which any firm offer might be made.”

Sycamore has until 15 April to make a firm offer.

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Ted Baker’s market value soared to £223m ($292m) on the back of the news.

The fashion house, which used to trade on the FTSE 250 (^FTMC), has seen the value of its stock fall as much as 90% since 2018 due to poor sales, profit warnings, accounting errors, the coronavirus pandemic, and the exit of its founder Ray Kelvin.

Kelvin was accused of inappropriate hugs with employees, and other inappropriate behaviour in the workplace, which he denied. He still owns a stake of around 12%.

The firm’s new chief executive, Rachel Osbourne, is in the middle of a transformation plan, looking to cut the company’s mounting debt pile, as well as boosting its online presence.

Ted Baker has nearly 400 locations across the globe, mostly in Europe, North America and the UK.

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“It looks like someone might bring an end to Ted Baker’s horrific time as a listed company,” Russ Mould, investment director at AJ Bell, said.

“Sycamore appears to have spotted an opportunity to step in and buy the company while its valuation remains low and to help with the recovery efforts.”

He added: “Ted Baker’s latest trading update shows an acceleration in sales growth, improved margins, a small year-end net cash position and encouraging comments from the management. That’s 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 turnaround potential.

“There are major headwinds over the coming months for retailers given the inflationary pressures on family finances. Therefore, acquiring Ted Baker now could come with additional challenges beyond those which have already shaken the business for years.”

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