Shares in Ted Baker (LSE: TED) have soared thanks to reports that founder Ray Kelvin is set to "throw his significant shareholding behind a buyout", says Neil Craven in The Mail on Sunday. The deal would leave the existing management in charge.
His intention to take the business private is good news for shareholders who have seen their shares collapse from a peak of over £32 a share last March to around £8.38 last week. The fall has been due to an "investor retreat" after Kelvin was forced out after staff accused him of inappropriately hugging them. A "brutal" environment for retail hasn't helped matters either.
A buyout may provide some relief for shareholders, but it makes less sense for the buyers, says Lisa Jucca for Breakingviews. While Ted Baker's shares are relatively cheap, this is because the group "started to run out of steam in its key North American market last year". while the Ebitda margin, a key gauge of operating profitability, is set to fall to just 13% as the group has had to mark down unsold items and spend money improving logistics.
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For the private-equity owners to achieve the 20% return on their investment that they expect, they would need to grow revenue by at least 6% a year, and boost the EBITDA margin to 15%. Ted Baker still has a lot going for it, says Miles Costello in The Times. It throws off plenty of cash, while a strong Christmas suggests the brand retains plenty of cachet. Still, the success of any buyout could hinge on whether Ray Kelvin "has the appetite" for putting in the work needed to turn the firm around.
Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
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