Key points:
- Ted Baker has received a number of expressions of interest
- They've now selected one potential bidder who gets to see all the detailed accounts
- A bid's not certain, but one seems likely – at what price?
Ted Baker (LON: TED) shares are up 3% this morning as the company reveals that it has received a number of potential offers for the entire share issuance. Further, they've sorted through those potential bidders and are now at the stage of having selected one of them to go through the necessary due diligence. The reason for the muted response is twofold. Firstly, we knew this was happening, secondly, there's no indication of what the takeout price is likely to be.
The background here is that Ted Baker may or may not be worth more as an independent company or as a part of another one, possibly even owned by private equity. Given this uncertainty, there have been a number of non-binding proposals – what we might call polite expressions of interest – in buying the company. That's what explains this chart of the Ted Baker share price:
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As with so many retail brands recently times have been tough and there's uncertainty as to the future. This led to an expression of interest from Sycamore Partners, as previously reported. That then led to an improved indicative offer from them and the very reporting of that led to another unsolicited and indicative expression of interest. That's why the uptick in the share price above.
That the Ted Baker management is open to such offers is what has led to other people indicating that they might be interested in making such. Which leads then to today's announcement. Of those varied people interested in possibly making an offer the Ted Baker management has selected one to take to the next stage. This next stage is “confirmatory due diligence” which can be roughly translated as “are management keeping the books straight?” although we'd never use such a phrase formally.
One point they make is that Sycamore is not participating in this process any more. Having made the initial – non-binding – offer they've seen that too many others are interested for them to be able to get a really fine price perhaps.
So, what we're sure about so far concerning Ted Baker shares is that there are some number of people willing to offer a price that the Ted Baker management think fully values the company. Of which one such possible bidder is now able to see the full books and refine their offer and check their calculations.
As management says, there's no certainty that there will be a full offer but given that there are several making indications it does seem pretty likely that there will be. Which then leaves us with, well, what is the price to be offered going to be? It seems likely that it will be above current market price for if it weren't it's difficult to see the Ted Baker management accepting it. But how much higher?
It's important to understand that this is binary. If someone has a look at the detailed books and then declines to make an offer then that's going to push the Ted Baker share price well down. For if one does that then those other potential bidders are likely to fade away pretty quickly. But if an offer comes then it's likely to be at higher than the current price. It'll take a few weeks for the books to be fine-tooth combed through. Only after that will we know more.