A fascinating insight into the mind of THG LON:THG CEO Matthew Moulding who is making no secret of his views on private equity funds and the London share market this morning as his company rejects a bid by private equity firm Apollo.
Moulding confirmed today that the UK Takeover Panel forced the announcement because of a leak. This looks to be a complete breakdown in talks with the CEO venting his frustration with Apollo Global Management NYSE:APO on social media.
While the official line has been that the bid price was not adequate, Moulding has hinted that Apollo had been still raising its price as the Takeover Panel deadline approached. The price is being touted as the official issue by the THG IR team, but there also seem to have been some more severe stumbling blocks around strategy and control.
“The last time THG shares traded at 30p was in 2009, when the Group had GBP 80m sales and only sold CDs,” Moulding said. “Today THG is 28 times bigger and we haven’t sold CDs for years!”
Shares in THG dropped another 10% on the news and were trading at 67p at time of writing. They had been recovering over the course of the last 30 days as investors hoped for positive news on the buy out.
Unequal private equity bids
Moulding said that most PEs that have approached the company have wanted 51% ownership, and views this as a deal killer for The Hut Group. Some 65% of the THG stock still sits with Moulding and several of the longer term shareholders. Much of the “pain” comes from being listed on the LSE, he said, where fast money trading the outstanding shares is undervaluing the company.
“It’s well known that PE deals are lucrative for management,” Moulding said. “THG would be worth billions more away from the daily market manipulation involving bankers, hedge funds and pundits.”
He said Apollo wanted to have controls over some areas of the business, particularly Beauty & Nutrition, where they demanded equity rights.
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“Smart financial engineering”
“The Apollo bid was based upon smart financial engineering capitalising on a wildly low share price from THG being on LSE,” Moulding said. “I get excited about building and growing things, not spreadsheets.”
Moulding also accused UK broker Numis of vengefully leading short attacks on the stock after they reached GBP 8/share, claiming the broker was sore at not being appointed as a broker to the stock.
The rejection of the Apollo deal by THG is a good indicator of how for some companies PE ownership can be a double-edged sword. Michael Bloomberg himself has been at pains to warn against the burdens which can be imposed upon management and staff – and indeed on corporate growth strategy – one a private equity partner is allowed in.