Online fast-fashion retailer Boohoo Group is to acquire the remaining 34% stake in its PrettyLittleThing brand in a deal that could potentially be worth GBP323.8m (US$397m).
Boohoo first took a 66% stake in PrettyLittleThing in 2017. The brand’s CEO Umar Kamani is the son of billionaire Boohoo founder Mahmud Kamani.
In a statement today (28 May), Boohoo said the acquisition is for an initial consideration of GBP269.8m, with a further GBP54m of consideration contingent on the group’s share price averaging 491 pence per share over a six month period between completion and a longstop date of 14 March 2024.
“By acquiring the remaining 34% stake in PrettyLittleThing today, the group is taking an important further step towards achieving its vision to lead the fashion e-commerce market globally by accelerating full ownership of a brand that is in high growth with enormous growth potential ahead of it, in a transaction that creates significant value for the group’s shareholders,” the group said in a statement today (28 May).
“After this acquisition and with its growing platform of wholly-owned, innovative fashion brands, the group believes it can continue to successfully disrupt the international markets it operates in today, whilst retaining a strong balance sheet in order to take advantage of numerous M&A opportunities that are likely to emerge in the global fashion industry over the coming months.”
The deal follows criticism from an investor about its accounting practices.
The ShadowFall hedge fund has accused Boohoo of misleading investors about profits and cashflow.
In a 54-page report, ShadowFall claims a recent GBP200m fundraising effort by Boohoo could be handed over in dividends or buyout costs to Umar Kamani. It also suggests the funds could be used to buy up ISawitFirst, an online fashion business set up by Jalal Kamani, the chairman’s brother.
Boohoo yesterday refuted the allegations made by ShadowFall, which had sent shares diving almost 12%.
“The group strongly refutes any allegations of understating costs incurred by PLT, thereby overstating its profitability. All inter-company transactions are conducted on an arms’ length basis,” it said in a stock exchange disclosure.
“The group operates a multi-brand strategy with the profitability of its more established brands such as Boohoo and PrettyLittleThing being significantly ahead of the group’s adjusted EBITDA margin of 10.2%; with that higher-margin being reinvested into new opportunities and brands that the group has started or acquired in recent years such as boohooMAN, Nasty Gal, MissPap, Karen Millen and Coast.
“As previously stated, the group intends to use the net proceeds of the placing to take advantage of numerous opportunities that are likely to emerge in the global fashion industry over the coming months, particularly following the disruption caused by the onset of Covid-19. The Group continues to review a number of possible M&A opportunities and will update shareholders as required.”
Last month, Boohoo reported a double-digit rise in both earnings and sales for the full financial year with pre-tax profit rising 54% to GBP92.2m for the 12 months to 29 February. Group revenue for the year rose 44% to GBP1.2bn from GBP856.9m, ahead of revised expectations of 40-42% the group provided in January.