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.

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.

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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.