Turkish online retailer said to have made £1bn approach to Asos
By Michele Maatouk
Date: Monday 05 Jun 2023
(Sharecast News) - Asos is reportedly on bid alert after the online fashion retailer received a £1bn approach from a Turkish company backed by Chinese giant Alibaba.
The Times cited city sources as saying that Asos received an approach from Turkish online retailer Trendyol in late December. The mooted deal would have valued Asos at between £10 and £12 a share.
The retailer's shares closed at 350p on Friday after it was ejected from the FTSE 250. Leading credit insurers have also recently withdrawn or reduced cover for the retailer's suppliers, a move that could further squeeze its cash flow.
It was understood that Trendyol has been working with advisers from Morgan Stanley. Neither party is under pressure to confirm discussions because there are no live talks. Asos and Trendyol declined to comment to The Times.
Last month, Asos was forced to shore up its finances by raising £75m from investors via a share placing. It also entered into £275m of new debt facilities at an average interest rate of 11%. The capital raise was supported by Anders Holch Povlsen, the Danish billionaire who is Asos's largest shareholder with a 26% stake.
Billionaire retail tycoon Mike Ashley has built a 7.4% stake in Asos.
City sources told The Times that Trendyol also approached Povlsen about the potential Asos deal to see whether he would be interested in participating. Lise Kaae, chief executive of Heartland, Povlsen's investment vehicle, told The Times: "Regarding rumours and speculations, we adhere to our practice of not commenting."
Leading credit insurer Allianz Trade withdrew cover entirely for Asos suppliers last week, citing adverse economic conditions and the retailer's finances. Atradius, another leading insurer, is also understood to have reduced cover. The removal of credit insurance, which protects suppliers from the risk of a retailer being unable to pay its debts, can spur suppliers to demand payment upfront.
An Asos spokeswoman told The Times: "Credit insurance cover has been tightening across the industry. We have not seen any adverse impact on trading relationships with suppliers due to changes to cover."
At 0940 BST, the shares were up 12.9% at 395.60p.
Russ Mould, investment director at AJ Bell, said the report shows that "someone was prepared to look through near-term problems and focus on the potential to revive the company's fortunes and put its brand back at the top of the fast fashion segment".
He continued: "Given that it has been six months since Turkey's Trendyol reportedly made the approach, one can assume that talks are not ongoing, otherwise we would have heard something from Asos by now.
"However, some shareholders may be frustrated that Asos didn't publicly disclose the approach, assuming the reports are correct. With the shares having slumped to £3.50 last week, there may be a group of investors who would be eager to accept a bid potentially three times that level.
"The weekend reports about the bid talks may force Asos to issue a statement and one would have thought CEO Jose Antonio Ramos Calamonte's phone won't have stopped ringing since the weekend.
"Takeover interest often emerges when a broken company lays out a recovery plan and there are early signs it is working. Those green shoots can give a suitor confidence it is worth making a bid now rather than waiting for the company to be repaired and then having to pay a much higher price when the risks are lower.
"Asos reported a significant improvement in profitability at the start of the year, perhaps explaining why it may not have been prepared to entertain takeover talks. It has since raised £75 million to help fund its turnaround and strengthen its finances.
"However, half-year results in May were disappointing with losses widening and an ongoing struggle with day-to-day trading. It has suffered from holding too much inventory and having to slash prices to clear this stock. That goes to show its recovery plan is still in the very early stages and that it remains vulnerable to further takeover interest while the share price remains in the doldrums."
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