Ted Baker recommends cut-price takeover offer from Authentic Brands

Ted Baker has recommended a cut-price takeover offer from US group Authentic Brands of £211mn despite the UK fashion brand’s rejection of previous approaches at higher valuations as “inadequate”.

Authentic Brands, a US group that owns businesses including Reebok, Nautica and Eddie Bauer, is offering 110p a share in cash for the company, which just four years ago was capitalised at more than £1bn.

Shares in Ted Baker rose 16 per cent on Tuesday morning.

Directors of the UK group said the bid represented “a fair value for shareholders and balances the company’s growth prospects with the risks of the uncertain economic environment in which the business is operating”.

This included “the potential for an extended period of recession in the UK”, they added. Authentic Brands cautioned that it could not rule out store closures and headcount reductions at the company.

The offer was supported by a majority of Ted Baker’s shareholders, including founder Ray Kelvin, value investor Toscafund and fund managers Schroders and Oasis, who together account for 50.7 per cent of the capital. The takeover would be implemented as a scheme of arrangement requiring approval from three-quarters of shareholders.

The formal sale process began in April when Ted Baker rejected an approach from private equity group Sycamore at 137p a share.

Authentic Brands was at one point during that process the company’s preferred bidder, but ended its interest due to the “deterioration in the wider macroeconomic environment”.

Ted Baker and its advisers resumed discussions with other parties but Authentic Brands subsequently submitted a revised proposal that they decided was “the most attractive and deliverable proposal for Ted Baker and its shareholders”.

It represents a premium of 18 per cent to Monday’s closing price, and 11 per cent over the share price before the takeover process began.

Authentic Brands described Ted Baker as “a distinctive British lifestyle brand with a rich, authentic heritage and strong worldwide customer recognition”, and said it would use its worldwide network to increase sales.

It intends to split the group into an intellectual property holding company, which it will control, and various retail, wholesale and ecommerce operating companies that could be transferred or sold to partners.

Although Authentic Brands stressed it intended to maintain Ted Baker’s London headquarters as the hub of its design teams, “the evolving macroeconomic situation” meant it “may need to be agile” and “adapt their operational strategy”.

That could entail combining Ted Baker’s research and development activities or its corporate headquarters with those of an operating partner, it noted. It also plans to “review the retail footprint” in a process that may lead to store closures.

It said there were “significant growth opportunities” for the brand in North America, where Authentic Brands owns half of a joint venture with mall owner Simon Property Group. Ted Baker’s US operations accounted for a quarter of sales in the most recent financial year.

The takeover comes a quarter of a century after Ted Baker floated on the London market and completes a fall from grace that began in 2019, when Kelvin was forced out of the business after allegations of inappropriate behaviour towards staff. He has always denied any improper conduct.

His longtime finance director Lindsay Page left less than a year after taking over from Kelvin as chief executive, following falling sales and the discovery of accounting errors.

The company was then hit by extended closures of stores and concessions because of the pandemic, and the untimely death of former chair John Barton, who had been installed to rebuild the board after the departure of Kelvin and Page.