Just a few weeks after urging THG to act on its share price, Kelso, has furthered its investment in the North West group.
It now holds 0.55% of THG’s total share capital, having increased its stake to 8m shares.
The firm stated that the move was focused on the “significant intrinsic value” of its nutrition business, and the shift away from chocolate and sugar to health and nutrition and it said that at some point in the future, it expected THG’s nutrition business to be owned by a global food or beverage company like Nestle, Coca Cola or Mars.
“We note yesterday’s public statement by the Healthy Markets Initiative, a group of 26 global institutional investors with assets under management of over $5.3 trillion as outlined by Alistair Gray’s article in the Food and Beverage section of the Financial Times and on the BBC website on 19 April 2023,” Kelso said in a release to the Stock Exchange.
“These investors are engaging with the world’s largest food manufacturers to promote changes in their strategy away from an over-reliance on sales of less healthy products. The Financial Times article refers to potential ‘systemic risk’ to companies that are over reliant on sales of these unhealthy foods. This article encapsulates exactly what Kelso referred to as the ‘chocolate and sugar problem’ and the need for these companies to diversify their revenues into healthier products for long term success. In our view, this strategic shift is akin to the major oil companies diversifying into renewable energy and highlights the huge relevance and underlying value of THG Nutrition.”
On Monday THG’s share price shot up by more than a third after it revealed there had been a preliminary buyout proposal from private equity firm, Apollo Global Management.
This was referenced in the Kelso statement:
“Any forthcoming offers for THG as a whole must clearly reflect this underlying value [of its nutrition business] and in the event that an acceptable offer is not forthcoming then a separation of MyProtein should be considered, alongside a potential partnership and minority investment from companies such as those highlighted.
“Kelso believes that THG’s nutritional business is likely ultimately to end up being owned by one of the large global food and beverage companies, all of which have already begun investing in nutritional, wellness and healthier assets to improve the mix of their sales between nutrition and chocolate or sugar products. All those transactions again support Kelso’s sum of the parts view of THG.”
In its full year results on Tuesday, THG reported a 2.7% increase in revenue, but an operating loss of £495.6m.