Analysts positive on THG Ingenuity demerger plan despite share price fall

THG’s shares may have fallen over the past year and dropped again on news of its plans for Ingenuity and its fundraise on Friday, but analysts think the deal is a good one.

The company is to demerge its Ingenuity unit — the tech business that offers full e-commerce services for third-party brands — into a private company (IngenuityCo) after ongoing pressure from shareholders.

It also announced a £75 million fundraise via a share placing that was oversubscribed and actually raised £95 million+. The money will support its business plans. 

In a note, analysts at Jefferies said this is the right thing to do and gave THG shares a Buy rating.

They said they “see this as a smart play” and that the continuing THG business “will be an attractive asset. We remain positive on THG’s demerger plans, believing it will simplify the investment case, remove a material cash drain from the listed operation, and leave a RemainCo that consists of two high quality, strategically-relevant, cash generative, global consumer businesses”. 

Those two businesses are the Beauty operation that’s dominated by its Lookfantastic retailer, and the Nutrition business.

Interestingly, it also emerged that Frasers Group made a strategic investment of £10 million in THG as part of the fundraise. The two companies already had a relationship after signing a strategic partnership deal back in June.