Kelso Group increases its stake in THG and asks for the spin-off of the nutrition business

Activist investor Kelso Group increased its stake in THG and has called on the online retail specialist to consider spinning off its Myprotein nutrition business.

Kelso, who first bought a stake in troubled THG in January, said he now held 8 million shares, through a mix of common shares and contracts for difference. This represents around 0.55% of THG’s total share capital.

The investment group said its increased stake in THG, formerly known as The Hut Group, stemmed from its belief in the “significant intrinsic value” of Myprotein, which could make the nutrition business a potential acquisition target. THG shares rose 6% on Friday morning after the announcement.

In a statement, Kelso said: “It is likely that THG’s nutritional business will ultimately end up being owned by one of the world’s largest food and beverage companies, all of which have already begun to invest in nutritional, wellness and healthier to improve their sales mix. between nutrition and chocolate or sugary products”. The investment group suggested that potential buyers could include Nestlé, Coca-Cola, PepsiCo and Cadbury owner Mondelēz International.

Kelso, which was founded in 2022 by former Zeus Capital boss John Goold, raised £3m in January from around 20 UK entrepreneurs to identify and unlock value on the UK stock market. Its largest independent shareholder is the betting firm Spreadex.

The investment group said THG founder and CEO Matt Molding had “constantly tried to explain the true value of the nutritional business” and that any potential acquisition deal would have to recognize the value of Myprotein.

THG shares soared 45% on Monday after news of a buyout approach by private equity group Apollo. But shares fell nearly 20% on Tuesday as THG reported mounting losses.

Molding then posted a rant online in which he quoted a 1990s song by singer Alanis Morissette and claimed it was “standard practice” for hedge funds, analysts and the media to “create negative coverage.” against publicly traded companies to reduce the price of their shares. .

Founded in 2004 by Molding and fellow former Phones4u executive John Gallemore to sell CDs online, THG expanded rapidly by exploiting a now-closed tax loophole that allowed companies to avoid VAT on small items, including CDs and DVDs, by post them in the UK from the Channel Islands.

Amid stiff competition from Amazon, the company moved to acquire niche e-commerce sites that did not directly compete with the US online specialist and to capitalize on its IT and logistics assets.

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Molding received a share windfall of over £800m after the THG float. As part of the IPO in September 2022, it took over the THG properties and then returned them to the group for an annual rent of around £19m.

THG declined to comment on Kelso’s statement.

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