Source: Sharecast
Kelso has bought 5m shares in THG - a stake of 0.4% - at an average price of 54.5p. This is the group's first investment.
"The board of Kelso believes that THG is a hugely exciting but significantly undervalued business," it said. "Matthew Moulding the THG founder and CEO has built a business with true global scale in two global growth sectors of Nutrition and Beauty employing around circa 8,000 employees with 18 fulfilment centres shipping to 195 destinations."
Kelso said the separation of the company into three main divisions "provides THG with significant strategic optionality".
"The potential to separate parts of the business could provide THG shareholders with significant upside from the valuation of the business today," it said. "Kelso believes that the current stock market value does not reflect the underlying value of the sum of each of the main THG divisions."
Established in 2022 "to identify, engage and unlock trapped value in the UK stock market", Kelso's strategy is "to invest in situations where there is an anomaly between the intrinsic value of a company and its stock market valuation".
"Kelso will, in particular, look for situations where it believes the sum of the parts of a business is greater than the current value," it said.
At 0935 GMT, THG shares were up 2.9% at 56.02p.
Russ Mould, investment director at AJ Bell, said: "THG chief executive Matthew Moulding doesn’t seem the type to welcome interference in his business, but other shareholders may welcome a new party putting pressure on the board to make changes."
Numis, which rates the shares at 'sell', said: "We believe a separation of the group will be hard to realise, and feel if the Nutrition business were to be split it would be at a lower valuation than implied, whilst we have concerns over the shape of the rest of the group. With the balance sheet providing further reason for concern, we remain negative."
