Acquisition of remaining 34% minority stake in PLT

RNS Number : 1928O

boohoo group plc

28 May 2020

 

The information contained within this announcement is deemed by the company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

For Immediate Release

28 May 2020

boohoo group plc

("boohoo" or "the Group")

Acquisition of remaining 34% minority stake in prettylittlething.com Limited

boohoo (AIM: BOO), a leading online fashion group, is pleased to announce the acquisition of the remaining 34% of shares in prettylittlething.com Limited ("PLT") from its minority shareholders (Umar Kamani and Paul Papworth) for an initial consideration of £269.8 million, potentially rising to £323.8 million. The acquisition is expected to be significantly earnings enhancing on a fully diluted basis with immediate effect.

Transaction rationale and financial impact

By acquiring the remaining 34% stake in PLT 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. 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.

Since the Group acquired its initial 66% stake in PLT on 3 January 2017, the brand has gone from strength to strength as part of the Group's multi-brand platform; generating £516 million of net sales in the year ending 29 February 2020 vs. £55 million in the year ending 28 February 2017, which represents a CAGR of 111% in this timeframe. In the last financial year, PLT's statutory after tax profit totalled £45.2 million, and its adjusted after tax profit totalled £47.2 million. The Group intends the senior management team at PLT, including Umar Kamani and Paul Papworth, to remain in their current roles and continue focusing on developing PLT into a global brand.

In the Group's most recent financial year ending 29 February 2020, it generated an adjusted after tax profit of £86.0 million, with Adjusted Net Income to Shareholders of £69.9 million; the difference (£16.0 million) being the minority shareholders' 34% interest in the adjusted after tax profits of PLT. Going forwards, this figure will be fully consolidated from the date of completion, and as a result, the group expects the acquisition to be significantly earnings enhancing on a fully diluted basis with immediate effect.

Transaction structure

The acquisition is for an initial consideration of £269.8 million, with a further £54.0m of consideration contingent on the Group's share price averaging 491 pence per share over a 6 month period between completion and a longstop date of 14 March 2024.

The initial consideration is to be settled through a combination of shares in the Group totalling £107.9 million and an up-front cash payment of £161.9 million, funded from the £240.7 million of net cash that the Group had on its balance sheet at 29 February 2020. Since its financial year end the Group has remained cash generative, and immediately following completion of the acquisition will retain over £350m of net cash; leaving it well-positioned to take advantage of future investment opportunities. The shares element of the consideration will be satisfied as outlined below:

· By the immediate issue of 16,112,331 Ordinary Shares in boohoo group plc representing £54.0 million, subject to a lock-up period of 18 months from the date of completion (based on the closing middle market quotation on 27 May 2020);

· By a further immediate issue of 16,112,331 Ordinary Shares in boohoo group plc representing £54.0 million, subject to a lock-up period of 24 months from the date of completion (based on the closing middle market quotation on 27 May 2020); and

· And by further contingent consideration of a further 16,112,331 Ordinary Shares in boohoo group plc, representing £54.0 million, that are to be issued subject to the Group's share price averaging 491 pence per share over a 6 month period up until a longstop date of 14 March 2024. If this condition is not met, the consideration will lapse.

The maximum total number of shares used for consideration in the transaction is 48,336,993, representing 3.9% of the group's issued share capital. Application has been made for 32,224,662 New Ordinary Shares to be admitted to trading on AIM at 8.00 a.m. on 2 June 2020 ("Admission").

Transaction process

Since the Group initially acquired its majority stake three years ago, the board has constantly reviewed and appraised PLT's future prospects, and the potential purchase price required in order to complete the buyout of the minority shareholding in PLT at any point in time.

The transaction is defined as a significant transaction under the AIM Rules. In addition, given the transaction is with a relative of the Executive Chairman, the Group has taken the following steps to ensure it represents fair value for the Group's shareholders:

· Set up an independent board committee comprising members of the Group's Executive (Neil Catto and John Lyttle) and Non-Executive Directors (Brian Small, Iain McDonald and Pierre Cuilleret) to negotiate and manage the transaction;

· Engaged with KPMG to appraise the transaction structure and valuation; and

· The independent Board committee has sought advice from Zeus Capital in its capacity as NOMAD to satisfy itself that the transaction has been conducted at arm's length and is in the best interests for boohoo group plc shareholders.

Upon completion of these steps, the members of the independent board committee are of the opinion that the acquisition is one that immediately creates significant value for the Group's shareholders; at a valuation that is deemed to be fair for all parties; factors in a material valuation discount for the minority stake; and supported by the valuation work performed by KPMG.

Umar Kamani, Founder & CEO of PLT commented:

"This deal represents another milestone in our journey at PLT. Since being a disruptive start-up in 2012 to a global fashion brand that generates over half a billion pounds in sales today, I am incredibly proud of what my team and I have achieved in such a short period of time. The team and myself have big ambitions for the brand, and I'm incredibly excited about what the future holds for PLT as it embarks on the next stage of its global journey as a fully-owned part of the boohoo group."

John Lyttle, Group CEO commented:

"We are delighted to be acquiring the remaining 34% stake in PLT. It has been a brand that has delivered strong growth as part of the boohoo group's platform, and has a great future ahead of it in the UK and overseas. I look forward to building on the great working relationship with Umar and the senior team at PLT as the Group continues to move forwards with its multi-brand strategy as part of its vision to lead the fashion e-commerce market globally."

Total Voting Rights

Following Admission, the total number of Ordinary Shares and voting rights in the Company will be 1,258,899,050. The Company does not hold any shares in treasury. The above figure may be used by Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the FCA's Disclosure Rules and Transparency Guidance and the articles of association of the Company.

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Enquiries
boohoo group plc
Neil Catto, Chief Financial Officer	Tel: [phone]
Alistair Davies, Investor Relations	Tel: [phone]
Clara Melia, Investor Relations	Tel: [phone]
Zeus Capital - Nominated adviser and joint broker
Nick Cowles/Andrew Jones (Corporate Finance)	Tel: [phone]
John Goold/Benjamin Robertson (Corporate Broking)	Tel: [phone]
Jefferies - Joint broker
Philip Noblet/Max Jones	Tel: [phone]
Buchanan - Financial PR adviser	[e-mail]
Richard Oldworth/ Kim Looringh-van Beeck/Toto Berger	Tel: [phone]

About boohoo group plc

"Leading the fashion eCommerce market"

Founded in Manchester in 2006, boohoo is an inclusive and innovative brand targeting young, value-orientated customers. Since 2006, boohoo has been pushing boundaries to bring its customers up-to-date and inspirational fashion, 24/7. boohoo has grown rapidly in the UK and internationally, expanding its offering with range extensions into menswear, through boohooMAN.

In early 2017 the group extended its customer offering through the acquisitions of the vibrant fashion brand PrettyLittleThing, and free-thinking brand Nasty Gal. In March 2019 the group acquired the MissPap brand and in August 2019, the Karen Millen and Coast brands, all complementary to the group's scalable multi-brand platform. United by a shared customer value proposition, our brands design, source, market and sell great quality clothes, shoes and accessories at unbeatable prices. These investment propositions have helped us grow from a single brand, into a major multi-brand online retailer, leading the fashion eCommerce market for 16 to 40-year-olds around the world. As at 29 February 2020, the boohoo group had around 14 million active customers across all its brands around the world.

 

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