Sycamore Partners is digging in the fashion discount corner. The U.S. fund, which specialises in struggling retail assets, said on Friday that it could make a cash offer for hard-pressed British fashion firm Ted Baker , triggering a 19% rally in its stock. For investors, the approach is a way of escaping the clutches of founder and former Chief Executive Ray Kelvin, whose overenthusiastic hugging habits led to his resignation in 2019 and a share price rout. Ted Baker shares are worth less than a tenth of their value before the scandal erupted.
and a share price rout. Ted Baker shares are worth less than a tenth of their value before the scandal erupted.
For Sycamore, it looks like an easy win. Assuming the U.S. fund pays 230 million pounds, a roughly 30% premium to Thursday’s market value, it could make a chunky 30% internal rate of return by simply growing revenue at 5% a year for five years and hiking the EBITDA margin to 12%, Breakingviews calculations show. That suggests the retailer may be worth more.
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