Ted Baker is back to square one.
The company last month picked a preferred bidder to continue negotiations on sale talks, but then said on Tuesday the potential buyer walked away from the process for reasons “not linked to its due diligence review of the company.”
Sources indicated that the buyer was Reebok owner Authentic Brands Group (ABG). Neither Ted Baker nor the brand management firm have confirmed the latter’s participation in the sale process. ABG did not respond a request for comment Tuesday.
So what’s next for Ted Baker?
The company said its board will review the several “other non-binding proposals” it has received and decide whether to move forward with any of them.
Given the global economic turmoil, financing has been harder to complete as lenders are doing double and triple checks for retail and fashion deals in case consumers respond to inflation but paring back spending. Financial sponsors don’t want to put more equity in a deal than they have to, which means sellers might have to settle for lower prices.
American private equity firm Sycamore Partners, which first reached out to the U.K. high street retailer in March, made repeated overtures to acquire the company and was spurned each time. One nonbinding offer was believed to be around 137.5 pence a share, or a deal valued at 250 million pounds to 255 million pounds ($327.8 million to $334.3 million). Sycamore even submitted a higher offer, but that too was rejected by the British fashion retailer.
At the time, Ted Baker said Sycamore’s proposed bid and other nonbinding offers were too low and “significantly undervalued” the company. That’s in contrast to the ABG proposal that was at 150 pence a share ($1.89 a share).
Sycamore isn’t known for paying high premiums on deals. With a failed deal on the table, there’s a chance the private equity firm might take a second look at the contemporary brand. But there’s also no guarantee that Sycamore is still interested in Ted Baker. A spokesman for the private equity firm on Tuesday declined comment. Other unconfirmed names bandied about as possible bidders include Frasers Group, which just acquired bankrupt Missguided, JD Sports, Bluestar Alliance, Asos, Asda and Shein.
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If Ted Baker wants to get a deal done, it may be forced to lower its selling price. That’s not unlike the scenario facing Kohl’s. The retailer had received nonbinding proposals, including one from Sycamore, in the $64 to $65 a share range, and was hoping to push for closer to $69 or $70. But that got derailed after its first quarter sales dropped 5.2 percent. Now it’s in exclusive talks with Franchise Group to sell the company at $60 a share.
In the case of Ted Baker, time might be working against it.
The high street retailer posted a 107.7 million pound pre-tax loss ($151.9 million) in 2020. Its largest shareholder is Toscafund, which acquired its 26.4 percent holding when company founder Ray Kelvin was forced to sell half of his stake to secure 105 million pounds (148.1 million) in emergency funding for the fashion brand. Kelvin, who retains a 12 percent stake in the company, exited his CEO post in March 2019 due to allegations of inappropriate behavior, which he denied.
So far, the contemporary brand has said it’s seen an increase in sales as people start to resume prepandemic office- and event-going routines. But that was earlier this year, and now the GfK Consumer Confidence indicator in the U.K. fell to a “new low of minus 40 in May 2022,” surpassing the previous record low of “minus 39 set in July 2008,” according to Trading Economics.
“This means consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown,” Joe Status, GfK’s client strategy director, said.