Boohoo buys remaining stake in Pretty Little Thing
Fast fashion retailer Boohoo has today bought the remaining 34 per cent stake in Pretty Little Thing after facing conflict of interest criticisms from a short-seller.
The deal is for an initial consideration of £269.8m, with a further £54m of consideration “contingent on Boohoo’s share price averaging 491p per share over a six month period between completion and a longstop date of 14 March 2024.”
Short-seller Shadowfall had criticised the amount of money the retailer was likely to have spent on buying out Pretty Little Thing’s shareholders, including Umar Kamani, who is son of Boohoo founder and chairman Mahmud Kamani.
Shadowfall published a 53-page report on Tuesday night alleging Boohoo had provided a “misleading impression” of its free cash flow position. It added that the retailer classes Pretty Little Thing as though it were “100 per cent wholly owned”. Boohoo denied all allegations.
Boohoo bought its initial 66 per cent stake in Pretty Little Thing from Kamani in January 2017. The retailer said buying the group outright was “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”.
Earlier this month, Boohoo raised £198m through a share placing and said it would use the proceeds to “take advantage of numerous opportunities that are likely to emerge in the global fashion industry over the coming months”. The retailer bought the Karen Millen and Coast brands last year.
Pretty Little Thing has had enormous success since it was created in 2012. It generated £516m of net sales in the year ending 29 February 2020 compared to £55m in the year ending 28 February 2017.
Minority shareholders Umar Kamani and Paul Papworth will remain in their current roles.
Kamani said: “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.”
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown said: “Boohoo’s shares trade on a fairly high valuation, which means there are high hopes for the future. International growth is particularly important from here, and it’s likely we’ll see more brands added to boohoo’s cart in the not-too-distant future that will help bolster this ambition.”
Shares are up 12.96 per cent.