It is not immediately clear how a £2.07bn bid undervalues a company with a £1.4bn market cap. But THG, online purveyor of cosmetics and protein powders, was quick to rebuff the bid from a brace of investment firms — as it has a series of earlier “unacceptable” offers.
The group, founded by Matthew Moulding, has long struggled with valuation dysmorphia. Investors initially proved willing enablers, accordingly the company had a market capitalisation of £5.4bn on its debut on the London stock exchange nearly two years ago.
Back-of-the-envelope calculations using round numbers suggest 170p a share is perfectly reasonable. That would value the equity at £2.07bn, or £2.36bn on a fully diluted basis. Adding on THG’s forecast net debt of about £160mn gives an enterprise value of £2.2bn or £2.5bn. Even on the undiluted share base, that gives an EV/ebitda multiple of 13.8 times, pretty much in line with the board pool of ecommerce players.