Ted Baker shares shot up 20% on Tuesday: here’s why

Shares of Ted Baker plc (LON: TED) are up nearly 20% on Tuesday after Authentic Brands Group LLC said it will buy the London-based fashion chain for £211 million.

Ted Baker shares valued at an 18% premium

The 110 pence a share all-cash offer that Ted Baker agreed to this morning represents an 18% premium on its previous close. The high-street clothing retail company said:

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The directors of Ted Baker consider the terms of the acquisition to be fair and reasonable. Accordingly, the directors intend unanimously to recommend that Ted Baker shareholders vote in favour.

Interestingly, however, Sycamore was willing to pay as much as £254 million for Ted Baker in March – a bid that the luxury brand rejected citing “undervaluation”.

Despite the retail news on Tuesday, Ted Baker shares are still down roughly 30% versus their year-to-date high.

What’s next for Ted Baker once the deal closes?

Upon completion of the transaction expected in the final quarter of 2022, ABG will split “TED” into an intellectual property holding company and operating entities (one or more) that will manage its stores, eCommerce and wholesale business. Authentic Brands Group said:

ABG believes that Ted Baker is better suited to private ownership, as this will facilitate a restructuring of the business in order to maximise its future potential [and] to enhance its revenue and profitability.

Ted Baker had been struggling with regaining investors’ confidence after founder Ray Kelvin resigned in 2019 on allegations of misconduct. A pandemic-driven hit over the past two years made things even worse.

In its latest reported quarter, retail revenue was still down 32% versus pre-COVID.