Activist fund Sparta builds stake in Dr Martens after share price slump
An activist fund manager has been building a stake in Dr Martens, the globally renowned bootmaker which has seen its valuation slump amid supply chain bottlenecks and a slowdown in US sales.
Sky News has learnt that Sparta Capital has quietly accumulated stock worth tens of millions of pounds in London-listed Dr Martens, and has been engaging with its board in an attempt to improve its financial and operating performance.
City sources said this weekend that Sparta – which was launched in 2021 by Franck Tuil, a longstanding executive at the prominent investor Elliott Management – was now a top ten shareholder in the footwear brand.
Dr Martens has seen its value plunge since its initial public offering two-and-a-half years ago.
At its listing price of 370p-a-share, the business was valued at £3.7bn, but in the past year it has been beset by challenges including deteriorating margins, weakening demand in some key markets and a troubled new US distribution centre.
On Friday, its shares closed at 146.1p, having nearly halved during the last year.
It now has a market capitalisation of just £1.46bn.
The company is chaired by Paul Mason, a veteran of retailers and consumer brands, and run by chief executive Kenny Wilson, a former boss of Cath Kidston.
Mr Wilson has been in charge since July 2018, overseeing its transition from private to listed company.
The company has seen its value plunge since its initial public offering
Bankers and investors have been suggesting for months that Dr Martens’ weak share price performance has left it vulnerable to an activist investor or an opportunistic takeover approach.
‘Constructive activist’
Sparta styles itself as a “constructive activist” which engages with the boards of the companies it invests in, in order to aid value creation for shareholders.
At Elliott, Mr Tuil led its investments in AC Milan, the Serie A football club, and the French drinks giant Pernod Ricard.
His new fund’s most prominent appearance on the share register of a London-listed business came at Wood Group, the oil engineering company which engaged in a months-long takeover negotiation with Apollo Global Management, the private equity firm.
Read more on Sky News:
Adidas selling its leftover Yeezy stock
Thousands of retail outlets disappear from British towns over past five years
In May, Apollo walked away from a deal and Wood’s shares have slumped while the company has continued to refuse to buy back its shares.
One institutional investor suggested that Sparta was likely to have pressed Dr Martens to launch a buyback, with the company announcing a £50m initiative to do so alongside its results earlier this summer.
The fund manager is also said by City insiders to have urged the company’s board to focus on improving the execution of its strategy and addressing the problems at its US distribution site more robustly.
Permira, the buyout firm, retains a 39% stake in Dr Martens, with management owning close to 10%.
Cause for optimism
Investors were given some cause for optimism this month when Dr Martens said in a trading update that direct-to-consumer sales had seen strong growth in its European and Asia-Pacific regions, while revenues in the Americas were lower, albeit in line with expectations.
“Addressing our performance in this region remains our number one priority for FY24,” it said.
“In Americas [direct-to-consumer], the actions we’re taking are progressing to plan, and we continue to expect that it will take until the second half to see a meaningful improvement here.”
Dr Martens announced during the spring that Jon Mortimore would retire as finance chief after seven years in the role.
It is now conducting an external search for his successor.
Revenue up
One person close to the company said its revenue had virtually trebled in the five years since Mr Wilson took over, with earnings before interest, tax, depreciation and amortisation soaring during the same period from £48m to £245m.
A Dr Martens spokesman said: “We engage with all our shareholders on a frequent basis and met with Sparta as part of the regular roadshow after our full-year results.”
Sparta Capital declined to comment.
Business
Claire’s to appoint administrators for UK and Ireland business – putting thousands of jobs at risk
The average two-year mortgage rate has fallen below 5% for the first time since the Liz Truss mini-budget.
The interest rate charged on a typical two-year fixed mortgage deal is now 4.99%, according to financial information company Moneyfacts.
It means there are more expensive and also cheaper two-year mortgage products on the market, but the average has fallen to a near three-year low.
Money blog: Bingo players ‘won’ share of £1.6m – then Gala took it back
Not since September 2022 has the average been at this level, before former prime minister Liz Truss announced her so-called mini-budget.
The programme of unfunded spending and tax cuts, done without the commentary of independent watchdog the Office for Budget Responsibility, led to a steep rise in the cost of government borrowing and necessitated an intervention by monetary regulator the Bank of England to prevent a collapse of pension funds.
It was also a key reason mortgage costs rose as high as they did – up to 6% for a typical two-year deal in the weeks after the mini-budget.
Why?
The mortgage borrowing rate dropped on Wednesday as the base interest rate – set by the Bank of England – was cut last week to 4%. The reduction made borrowing less expensive, as signs of a struggling economy were evident to the rate-setting central bankers and despite inflation forecast to rise further.
Please use Chrome browser for a more accessible video player
Bank of England cuts interest rate
It’s that expectation of elevated price rises that has stopped mortgage rates from falling further. The Bank had raised interest rates and has kept them comparatively high as inflation is anticipated to rise faster due to poor harvests and increased employer costs, making goods more expensive.
The group behind the figures, Moneyfacts, said “While the cost of borrowing is still well above the rock-bottom rates of the years immediately preceding that fiscal event, this milestone shows lenders are competing more aggressively for business.”
In turn, mortgage providers are reluctant to offer cheaper products.
A further cut to the base interest rate is expected before the end of 2025, according to London Stock Exchange Group (LSEG) data. Traders currently bet the rate will be brought to 3.75% in December.
This expectation can influence what rates lenders offer.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike