Friday, 15 May 2020

Boohoo raises £200m to buy brands, but it won't take on store chains




Boohoo is on the hunt for acquisitions. The e-tailer has already shown itself to be an acquisition-hungry company and with the business having just raised almost £200 million in extra funding, it looks likely that many of the opportunities arising at present will see it buying even more brands.

The company said on Friday that it actually raised £197.7 million in just 24 hours via a share placing, and that’s on top of the £240 million+ in net cash it had at the end of February.

To raise the new cash, it placed around 58 million shares, representing 5% of its issued share capital, at a price of 340p each.

And the company said that it intends to acquire new brands to add to its existing portfolio of Boohoo, PrettyLittleThing, Nasty Gal, MissPap, Karen Millen and Coast.

It aims to take advantage “of numerous opportunities that are likely to emerge in the global fashion industry over the coming months” and is looking at a number of possible merger and acquisition deals.

CFO Neil Catto said, “we want to have the ultimate competitive position because there will be distressed businesses, which we will be able to help with our firepower”.

And CEO John Lyttle added that the company is focusing on deals in Europe and the US as “retail is not the best place to be at the moment and we think there will be a lot of opportunities for us”.

But there could be a sting in the tail for any businesses that the company buys as it doesn't want to move out of its online comfort zone. The CEO also said that it's unlikely to continue to operate any physical shops if it bought them.

It's interesting that the company has raised this cash purely for brand purchases with the firm clearly having enough cash to see it through the crisis before it did so. Most of those businesses that have been raising cash during the pandemic period have done so as a means of staying afloat rather than as a way of buying in extra growth. And that difference really underlines how supremely successful Boohoo is as a company.

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