(Reuters) - Shares in British fashion retailer Ted Baker surged as much as 17% on Monday on reports that its founder and former chief executive Ray Kelvin would support a private equity buyout months after he quit over allegations of misconduct.
Kelvin, who had been CEO since the company’s launch in 1988, has indicated that he would support a deal to take the company private under the existing management, the Sunday Times reported.
Speculation of a buyout comes after Ted Baker’s shares lost more than a quarter of their value last month when the retailer warned that underlying profit for the year would fall short of analysts’ estimates.
The warning underlined the task facing Lindsay Page, who was promoted to permanent boss in April as the high street retailer sought to move on from misconduct allegations against its leading shareholder Kelvin.
Another media report said Kelvin would ask Page to help him run the retailer if he took it private.
Ted Baker and representatives for Kelvin declined to comment on the reports.
Ted Baker also reported its first drop in annual profit since 2008 in March as brick and mortar clothing chains suffered in the face of online competitors and as consumers reined in spending.
“Ted Baker’s pair of profit warnings, perceived corporate governance woes and slumping share price have all had analysts wondering whether the firm was open for a bid,” said Russ Mould, investment director at stockbrokers AJ Bell.
Mould said Kelvin is the most logical bidder for the firm, should one ever appear.
“With the private equity industry awash with cash, such funding should be around for anyone prepared to back Mr Kelvin’s judgement,” he added.
Kelvin resigned as boss of the company in March to allow the fashion brand he founded to move on from claims he presided over a culture of “forced hugging”. He has denied all allegations of misconduct.
Kelvin owns 34.9% of the company according to Refinitiv Eikon data, implying that any deal to buy Ted Baker could require his approval.
“While the buyout will surely be a good thing for Ray Kelvin, for other shareholders the question remains: what is the motive to keep the company’s shares as part of their portfolio?” Fiona Cincotta, Senior Market Analyst at Cityindex, said.
Ted Baker’s shares were 13.8% higher at 951.9 pence at 1108 GMT, taking them to the top of London’s midcap index.
Ted Baker opened its first store in Glasgow in 1988 with quirky details on suits, shirts and dresses helping the company stand out from rivals. The retailer has 560 stores and concessions globally.
Mould said Ted Baker had lost some credibility with analysts and investors, but it still resonates with customers. He also pointed to Ted Baker’s modest debt pile with no pension deficit.
Any deal would also come at a time when British retailers are facing a perfect storm of rising costs, slowing growth and the hit to uncertainty spurred by Britain’s chaotic departure from the European Union.
Reporting by Noor Zainab Hussain in Bengaluru, editing by Louise Heavens