Shares in THG have slumped by 20% after it was suggested that a takeover deal with a US private equity giant is unlikely to be completed.
It was revealed last month that Apollo Global Management is interested in taking the Manchester-headquartered group private and has until May 15 to either make a firm offer or walk away.
Since the announcement, shares in THG have been on the rise from 66p to 117p - their highest value since June last year.
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However, research from Bloomberg Intelligence appears to have spooked some investors resulting in the group's share price falling to 92p today (May 4).
The research said it seems unlikely that THG would accept a takeover bid and for Apollo to make a profit based on its sum-of-the-parts valuation.
It said: "This makes us question the viability of Apollo's takeover intentions."
Bloomberg Intelligence added: "Structural beauty and nutrition sector growth and low profitability are propounding the case for a breakup."
In response to the research and the sharp fall in THG's share price, activist investor Kelso Group called into question its conclusions.
Kelso Group's CEO is John Goold and is chaired by former DLA partner Sir Nigel Knowles while other investors include Luke Johnson, Nigel Wray and Umar Kamani.
It first bought into THG in January and has since upped its stake.
A statement posted on LinkedIn said: "Kelso notes the Bloomberg Intelligence comment this morning and the subsequent significant fall in the THG share price.
"Kelso is of the opinion that the article headline of 'THG unlikely to close a deal with Apollo seeing a profitable exit' published this morning, could have been clearer and may have resulted in some confusion around THG.
"Kelso also notes that the Bloomberg analysts, in the article, attribute a sum of the parts value of £2.7bn to THG, c195p a share based on the number of shares in issue, more than double the current share price, which concurs with Kelso's view.
"The article went on to say that the THG board will not accept this price given the declined 170p per share bid last year and Apollo's need to buy at a sizeable discount to current fair value.
"Kelso is of the opinion that these points may not be correct and but do in fact reaffirm the underlying value of THG and the reason that Apollo is reviewing the business.
"Whether or not Apollo ends up bidding for THG, we'll all have to wait and see, but given Kelso's view of the strategic value of both THG’s nutrition and beauty businesses, as per the previous RNS of 21 April 2023, the board of Kelso would be very surprised if there were not multiple potential parties assessing THG as a whole or in part.
"Under UK Takeover rules, if there are no longer talks with Apollo then we understand that there has to be an announcement to the market immediately.
"If there are new multiple approaches for all or part of THG we would not necessarily expect to be formally informed.
"Kelso also reaffirms its view of the fundamental value in THG, especially with the tailwinds the business is experiencing. Irrespective of the outcome of this process, Kelso firmly believe that in time this value will be unlocked, and this current interest from Apollo has strengthened our conviction."
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