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Shares in online beauty products retailer Adore Beauty Group (ASX: ABY) surged almost 25 per cent this morning after the company confirmed it had received a takeover offer valuing the company at up to $122 million.
However, Adore has rejected the bid received from UK-based online retail company THG plc (LSE: THG), arguing that it undervalues the company.
Adore, which saw a turnaround in earnings in the second half of FY23 and a sharp rise in revenue in the first quarter of FY24, says the non-binding proposal was subject to several conditions including due diligence.
“Following a review of the terms of the proposal with the assistance of its financial and legal advisers, the board of Adore Beauty concluded that the proposal undervalued the company, was unable to be implemented, and was not in the best interests of shareholders,” the company says in a statement to the ASX today.
“For these reasons, the board rejected the proposal.”
However, rejection of the proposed bid hasn’t stopped investors speculating that a deal may yet eventuate.
Shares in Adore Beauty surged by 23 cents, or almost 25 per cent, to a high of $1.165 in early trading.
At that level the share price was still well below the indicative offer from THG of between $1.25 and $1.30 per share.
THG, formerly known as The Hut Group, is an online retailer of cosmetics, dietary supplements and luxury goods and through its THG Beauty division sells its own branded and third-party cosmetics products, including skincare, haircare, makeup and fragrances.
The UK company earlier this year walked away from a potential takeover from US private equity group Apollo Global Management Inc, arguing that the offer had undervalued the group.
Adore Beauty, which made its ASX debut in 2020 via a $270 million IPO, has been struggling to regain momentum after a pullback in online sales post-COVID.
The shares, which were offered at $6.75 each in the IPO, have spent most of this year trading just below $1.
However, in a recent trading update the Melbourne-based company posted revenue of $47.5 million in the first quarter of FY24, up 4.7 per cent on the prior corresponding period.
In announcing its rejection of the THG proposal, the Adore Beauty board says it is currently focused on ‘maximising value for all shareholders’.
The company says it will keep the market informed regarding any developments in accordance with its continuous disclosure obligations.
Adore Beauty shares were trading at $1.105 each at 12.41pm (AEDT).
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