Shares of the THG Group PLC (GB:THG) surged on Thursday following the retailer’s announcement to demerge its Ingenuity division into an independent private company. With this move, THG aims to streamline its operations while capitalizing on the revenue-generating potential of its remaining Nutrition and Beauty segments.
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Under its Beauty and Nutrition Segments, THG sells own-brand and third-party cosmetics, dietary supplements, and luxury goods. Meanwhile, Ingenuity offers e-commerce solutions to other retailers.
Market Applauds THG’s Demerger Plans
The market reacted positively to the demerger news, with THG shares rebounding from a two-year low last week. Following the announcement, the stock climbed 3.6% on Thursday.
The company initially proposed the demerger in September, followed by a fundraising in October. With THG shares dropping by over 90% since its listing, the company appeared ready to pursue a strategy to win back investor confidence. However, investors are concerned about whether the Ingenuity business could be valued higher as an independent entity rather than a part of the larger THG group.
THG Reveals Demerger Details
According to the circular, THG Group has notified its shareholders about the proposed reorganization, followed by a general meeting scheduled for December 27, 2024, to vote on the resolution. The demerger will let shareholders convert their ordinary shares into B Shares, giving them the right to receive Ingenuity shares on a one-to-one basis.
Additionally, the company stated that Ingenuity will exit the THG Group with £88 million in cash and a new £55 million debt facility, providing enough funding. Moreover, THG will transfer lease liabilities of £298 million to Ingenuity upon completion, reducing THG’s gross debt.
THG also revealed its guidance for the remaining business after the demerger. In the medium term, the company expects annual revenue growth in the mid to high single digits for the remaining business. Capital expenditure is projected to decrease to around £20 million in FY24 from £33.4 million in FY23.
What Is the Target Price for THG?
As per the consensus among analysts on TipRanks, THG stock has been assigned a Moderate Buy rating based on two Buy and two Hold recommendations from analysts. The THG share price target is 76.75p, which is 68.8% above the current level.
Year-to-date, THG stock has fallen by around 40%.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
