Another day, another acquisition.
And once again the takeover frenzy for UK companies is being led by foreign private equity houses, with the latest approach for The Hut Group coming from giant US company Apollo.
Shares in the online retail technology company rose 44.9 percent on news that THG’s Matt Molding — who is also its largest shareholder — has received a preliminary approach.
The offer comes at an opportune time for Molding, who has been tasked by at least one major investor to get his house in order as THG is poised to expose even bigger losses.
The company lost an estimated £277 million last year, bringing total losses over the past five years to more than £1 billion.
Takeover fury: 14 offers have been made by private equity firms for UK companies so far this year
It is predicted to lose a further £650 million over the next four years. That’s more of a country house to get in order than a house.
So it comes as no surprise that going public is a serious option for Moulding, who has made no secret of his disillusionment with the London Stock Exchange.
Since Molding floated THG for £5.4bn three years ago, shares have collapsed, struggled with investor relations and governance issues and been forced to give up its gold share.
Being out of the spotlight will certainly benefit Molding, but could hurt some original investors.
That Apollo is betting on changing THG’s online platform is interesting to say the least, but what it does show is just how heavily Marc Rowan of the sun god is investing in the UK.
Apollo is also expanding its London office by moving two offices into a massive office on Soho Place, in what Rowan calls his “global financial hub.” The European team manages a quarter of its £584 billion war chest.
In another move, John Wood Group confirmed it was open to more talks with, yes, you guessed it, Apollo. Wood has already turned down four previous offers, so any new one would need to exceed £1.7bn to be accepted.
Many more offers are on the table. Network International, the Middle East and Africa payments group, says it is about to accept an offer from Francisco Partners and CVC, two more private equity firms.
Veterinary specialist Dechra was approached last week by the Swedish private equity firm EQT, while Industrials REIT gave the nod to a takeover by the American company Blackstone. Event company Hyve Group has struck a deal with Providence Equity Partners, another US company, although some major investors are reportedly resisting.
What all these bids have in common is that Britain is being sold cheaply. So far this year, 14 offers have been made by private equity firms for UK companies.
Too many have been made vulnerable because of the weaker pound since the Brexit vote in 2016 when sterling was at $1.45.
Post-Brexit, too many investors fled – a serious and foolish misjudgment – which meant that UK companies remained undervalued and discounted, especially to their European peers.
Although the British pound has recovered from last year’s lows of £1.24, it is still low at historic levels.
In fact, the UK economy looks much brighter than it did a few months ago. See the confident way Chancellor Jeremy Hunt brushed off the IMF’s gloomy forecast last week in Washington.
It is still too early to predict strong growth, but there are green shoots and inflation is falling.
Foreign predators see that too, which is why they are in a hurry to buy British assets before they adjust to more realistic levels and the pound strengthens.
Perversely, you could say it’s a vote of confidence in Britain. It is therefore all the more tragic that UK pension funds – and even private investors – do not see the same benefit as foreigners.
With their obsession with buying gilts, funds are losing.
Yet the cards have been on display for years. The government and the London Stock Exchange must speed up reforms to get pension funds back into the stock market. If domestic investors don’t buy their own shares, someone else will.
On the run
Yet it is never too late to do the right thing. The FTSE 100 has now made gains for several days in a row – its best run since Christmas 2020.
The index reached its highest level in five weeks, but later gave up the ghost. There is still time to invest before more foreign suitors have picked up all the goodies.
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