CMA puts the cat amongst the budgies - what next for Pets at Home?

This week in deals and a look ahead to a big announcement next week

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I want to use the Friday newsletter to summarise a few things going on out there.

I want to keep the channel open for people to drop me a line, or give me a call to share with me their take on what something really means. 

Let’s start with a few immutable truths. The market for deals is slow. The stock market is an unforgiving place, and plenty of quoted businesses feel unloved, undervalued and must be considering alternatives.

At the start of the year I thought it inevitable that there would be moves to take THG off the market, or at least start the process of an orderly break up.

Matt Moulding’s entertaining LinkedIn posts reveal his consistent disdain for the accepted norms of running a quoted business. So this week we’ve seen him announce the formal resignation of his long term backer Iain McDonald from the THG board.

In a massive display of ‘it’s my company, I’ll do what I want’ in the next breath he said McDonald (pictured) might not be on the board, but he’s very much still on the THG bus as an advisor on strategy.

Possibly as significant is the departure of THG Ingenuity chief executive Vivek Ganotra who left the business after two years having launched a major initiative to attract key enterprise clients for THG to provide that end-to-end ecommerce engine and fulfilment operation. 

Moulding speaks of the “three businesses within THG”, which I think hints towards a break up. With the 4,000-employee Ingenuity division looking like a candidate for an independent future. It will be one way of fulfilling the ambitions of insurgent activist investor Kelso which favours that route to creating value than languishing on the market.

I’m also on record of sensing a move towards the stock market exit door for Pets At Home. 

However, the Competition and Markets Authority (CMA) put the cat amongst the budgies last week with the start of an inquiry into the veterinary sector, sending the share price into a spiral. 

They had every right to feel “incredibly disappointed”. Operationally, under Lyssa McGowan, Pets at Home has done all the right things, but the steady share buyback programme will probably accelerate with the price at a low point.

Analysts at Shore Capital were convinced Pets wasn’t the target when the CMA first started the process. They were wrong.

Elsewhere, the CMA is already taking a closer look at the housebuilding sector, potentially rocking the foundations of the ambitious plans to merge Barratt and Redrow.

One deal that caught my eye this week was Maven’s sale of most of its stake in Hull-based The 55 Group, to LDC. I’m interested in where the upside is for LDC in the Hull-based group, which provides built environment-related software and services to public and private organisations across the UK. The key ingredient that makes software businesses so attractive, is recurring revenue from licenses.  

Next week, the day after our Rainmakers conference at the Emirates Old Trafford in Manchester, it’s the launch of the Northern Powerhouse Investment Fund in Leeds.

There’s barely a conversation I have with anyone in that part of the venture capital market who doesn’t know who’s got the gig to run the fund’s next phase, but I promised not to spoil the surprise.