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THG has announced it has ceased talks with Apollo Global Management over a takeover approach after its indicative valuation of the group was “inadequate”.

The beauty and sports nutrition group announced on 17 April it had entered into discussions with Apollo over a “highly preliminary” approach.

Following the receipt of an indicative proposal, its board entered into a “short” period of discussion with Apollo to “provide it with an opportunity to improve the proposed valuation”.

However, it said that “it became clear… there is no longer any merit in continuing to engage with Apollo” as it rejected its approach. Its rejection, it said, was consistent with its view of previous offers for the company, which were also rejected “based upon inadequate valuations and the nature of those offer structures”.

A year ago it rejected a bid from a consortium headed by Belerion that valued the firm at £2.1bn at 170p per share.

Separately this morning Apollo released a short statement confirming it does not intend to make an offer to acquire THG.

THG also said this morning the profitability and cashflow improvements delivered during the first quarter of 2023 have continued in Q2, along with ongoing online sales momentum further supporting its full-year guidance.

“The actions undertaken by management since the beginning of 2022 to improve operating leverage, reduce capex and generate working capital efficiencies, coupled with ongoing deflation in whey commodity prices, underpin significantly improved profitability and cashflow neutrality in FY 2023,” it said.

Therefore the company reiterated its expectations to deliver positive free cashflow in FY 2024 and adjusted EBITDA margins of around 9% over the medium term.

It added that, following completion of the divisional reorganisation and subsequent strategic review, the group now has “a full range of strategic options to maximise shareholder value” across the nutrition, beauty and Ingenuity divisions.

THG chair Charles Allen commented: “THG’s board, in accordance with its fiduciary obligations and as demonstrated with its recent engagement with Apollo, will always give due consideration to all potential options which provide the opportunity to maximise value to THG’s shareholders.

“The board remains fully confident in THG’s strategic direction and long-term prospects as an independent company. As stated in our recent results, with a strong balance sheet and category-leading positions within substantial global end markets that continue to benefit from long-term structural growth, we have confidence in our ability to deliver long-term value for shareholders and remain on track to be cashflow positive in 2024.”

The group’s shares have dropped 15.2% on the news to 65.2p – back to the level they were trading at before Apollo’s approach.

The shares had hit 117p in early May on hopes Apollo would make an offer.

Morning update

On the markets this morning, the FTSE 100 is up 0.3% to 7,755.1pts.

Risers include Just Eat, up 5.3% to 1,483p, Nichols, up 3.9% to 1,075p and Science in Sport, up 2.9% to 14p.

Fallers, along with THG, include Diageo, down 1.6% to 3,563p, Hilton Food Group, down 1% to 728.4p and Hotel Chocolat, down 1% to 175.2p.

Yesterday in the City

The FTSE 100 closed yesterday down 0.1% at 7,730.5pts.

Risers included Fever-Tree, up 2.1% to 1,438p, B&M European Value Retail, up 2% to 488.7p, Just Eat Takeaway, up 2% to 1,408p, Pets at Home, up 1.4% to 395p, Kerry Group, up 1.4% to €93.55 and Glanbia, up 1.2% to €13.96.

The day’s fallers included THG, down 9.1% to 74.7p ahead of this morning’s announcement.

Also down was Virgin Wines, down 4.2% to 34p, McBride, down 4.2% to 31.1p, Greencore, down 2.8% to 82.3p, AG Barr, down 1.7% to 514p, Deliveroo, down 1.7% to 107.3p, Tesco, down 1.6% to 273.6p and Nichols, down 1.2% to 1,035p.