The Adore Beauty Group Ltd (ASX: ABY) share price has jumped 22% after the beauty e-commerce received a takeover offer.
Adore Beauty confirmed to the market it had received a non-binding, conditional and indicative offer from THG plc (LON: THG) to buy 100% of the business through a ‘scheme of arrangement’ (takeover) for between A$1.25 to A$1.30 cash per share.
The proposal was subject to various conditions, including due diligence.
After looking at the terms of the offer with the help of its financial and legal advisers, the Adore Beauty board decided that the proposal undervalued the company, was unable to be implemented and was not in the best interests of shareholders.
For all of those reasons, the board decided to reject the proposal.
Adore Beauty’s board said it’s focused on maximising value for all shareholders and that it will keep shareholders informed in accordance with its continuous disclosure obligations.
It’ll be interesting to see if THG comes back with an improved offer. I’d guess THG wasn’t expecting that the first preliminary offer would be enough to get across the line because the Adore Beauty share price was higher than the offer price less than a year ago.
How much of an offer would it take to get more engagement with the Adore Beauty share price? And what would it take for the offer to be accepted? I’m not sure, but it’s clear the Adore Beauty board want a lot more.
The trading numbers are starting to turn positive for Adore Beauty – in the first three months on FY24 revenue improved 4.7% to $47.5 million, while active customers grew 1.5% to 803,000. Returning customers reached a record of 497,000.
Adore Beauty’s mobile app now represents more than 26% of all revenue. The company is also seeing new brands added to its portal, and its private label sales continue to grow.
I can see why it’s attracting interest with the possibility of revenue and profit growth. In the longer-term, I believe Adore Beauty will become a profitable business with good economics, particularly if it can keep growing its private label sales.
I wouldn’t be surprised if the Adore Beauty share price rises more if there another offer happens, but I wouldn’t buy shares on just that expectation alone.