In the spotlight, THG, the digital retail powerhouse, confronts heightened pressure from activist investor Kelso Group, urging clarity on potential break-up strategies. Kelso has escalated its campaign, advocating for the demerger of THG’s three distinct divisions—beauty, nutrition, and e-commerce services.
Kelso Group’s letter to THG’s board emphasizes the imperative for a comprehensive stock market statement outlining proposed actions, citing a «significant inherent disparity between THG’s share price and true value.» The investment firm contends that the individual worth of each business unit within THG surpasses the conglomerate’s current market capitalization.
In the communication to THG, Kelso stated, «The stock market does not favor diversified conglomerates, a category THG falls into. We do not prescribe a specific sequence of events but stress the importance of making it clear to shareholders that all available options are under consideration.»
With exposure to approximately 0.55% of THG’s share capital, Kelso argues that a demerger could potentially propel THG’s share price to 225p, achieving a market valuation of around £3 billion. This stands in stark contrast to the current valuation of approximately £1 billion, significantly lower than the £5 billion when THG first listed on the stock exchange in September 2020.
Liberum analysts propose that THG could reach the target price by benchmarking each division against industry peers in the market evaluation.
