Asos has been put on alert for bids after a Turkish firm backed by Chinese giant Alibaba approached the online fashion retailer with a £1-billion offer.
According to sources in the city, Asos was approached by Trendyol of Turkey, an online retailer with a rapid growth rate, late December. The proposed deal valued Asos between £10 to £12 per share.
After being ejected, the retailer’s stock closed Friday at £3.50 pounds after its removal from the FTSE 250. Credit insurers also reduced or withdrawn coverage for the retailer’s supplier base, which could further impact its cash flow.
Trendyol has been said to be working with Morgan Stanley advisers. There are no ongoing talks, so neither party feels compelled to confirm the discussions. Asos declined to comment.
Asos began by selling clothes that TV stars wore. It has since grown to be one of the UK’s largest fashion retailers, selling clothing from Nike and Barbour. Its shares, however, have lost 93% of their value in the last two years due to its rising costs just as customers returned to the high streets after the pandemic.
Last month, the retailer led by CEO Jose Antonio Ramos Calamonte was forced to raise £75 million via an equity placement from investors. Asos has also taken out £275 million in new debt at an interest rate of 11%. Anders Holch Povlsen supported the capital raise. The Danish billionaire is Asos’s largest shareholder, with a 26% stake.
Mike Ashley, a billionaire retail tycoon who controls Frasers Group and owns 7.4 percent of the company, has built up a stake.
Sources in the city claim that Trendyol approached Povlsen to ask if he was interested in taking part in a potential Asos acquisition. Lise KAAE, the chief executive officer of Heartland Investments, Povlsen’s investment vehicle, stated: “In relation to rumours or speculations, we adhered to our policy of not commenting.”
Last week, Allianz Trade, the leading credit insurer, removed all cover for Asos’ suppliers. The reason given was that Asos’ finances and adverse economic conditions were to blame. Atradius is another major insurer that has reportedly reduced its cover. Credit insurance can be removed, which would protect suppliers against the risk that a retailer might not pay its debts. This could lead suppliers to insist on payment in advance.
Credit insurance coverage has tightened across the industry. Asos spokesperson said that the changes in cover had not adversely affected their trading relationship with suppliers.
Asos has a sales volume of £3.9 billion and relationships with hundreds brands. Trendyol will raise $1.5 billion in 2021 from investors such as SoftBank, Qatar Investment Authority and Alibaba. This will increase the valuation of Trendyol to $16.5 billion. According to PitchBook’s data, Trendyol had sales of £2.6 billion last year. However, it was still a loss-making company.