Manchester-based online beauty and nutrition retailer The Hut Group (THG) announced a complex investment agreement with Japan’s SoftBank Group late on Monday.
The Hut Group said SoftBank Group signed an “option and collaboration agreement” for a $1.6 billion investment in The Hut Group’s “yet to-be formed” THG Ingenuity business — implying an enterprise value of $6.3 billion for a 19.9% equity interest.
“THG and SB Management Limited (SBM), a wholly owned subsidiary of SoftBank Group Corp., sign an option and collaboration agreement with the intention to explore potential, future commercial arrangements between THG’s and the SBM respective affiliates …” said The Hut Group.
“THG Ingenuity comprises the Ingenuity platform IP and the Ingenuity operating trade and assets, which will be separated into a THG owned and controlled subsidiary capable of receiving the investment …”
As part of the complex deal, The Hut Group announced a proposed $1 billion capital raising “consisting of a subscription of approximately $730m from SBM and a placing of up to $270m with long-standing, technology-focused shareholder Sofina expected to participate in the placing in an amount of up to $85 million …”
The Hut Group announced separately an agreement to acquire Bentley Laboratories LLC, a New Jersey based beauty developer and manufacturer for $255 million, subject to regulatory approval in the United States.
The Hut Group CEO Matthew Moulding said: “We are delighted to announce this financial and trading partnership opportunity with SoftBank, one of the world’s leading technology investors, recognising both the capability and inherent value of our proprietary technology platform, Ingenuity.
“The trading partnership opportunity is particularly exciting, providing Ingenuity with an unparalleled global growth opportunity.
“Furthermore, the combination of the acceleration of growth within Ingenuity and its separation into a distinct entity will enable THG to unlock significant incremental shareholder value over time.
“The capital raise will provide meaningful capital to accelerate our strategic growth ambitions across our whole business.
“The acquisition of Bentley materially increases our capability in beauty manufacturing and product development, and strengthens our position as the leading digital beauty business globally.”
Explaining the deal, The Hut Group said in a stock exchange statement: “THG … announces a financial and trading collaboration with SBM, comprising a subscription of approximately $730m in THG new ordinary voting shares and an option and collaboration agreement granting SBM an option to subscribe for a 19.9% interest in THG Ingenuity, and establishing potential collaboration arrangements drawing on the expansive opportunities amongst the group’s and SBM’s respective affiliates as appropriate.
“THG Ingenuity is a yet to-be formed, THG owned and controlled subsidiary group, comprising the Ingenuity platform IP and operating trade and assets.
“To effect the SBM investment, THG Ingenuity will be required to be a separate legal entity capable of receiving the investment and this process has already commenced.
“THG believes that a separation of its key businesses will maximise shareholder value and intends to undertake a review of the group structure with the intention to commence a separation within 15 calendar months.
“THG Ingenuity will be prioritised to expedite the potential collaboration with appropriate SBM affiliates and formalise the investment for a minority 19.9% stake …
“To support the continuation of the group’s successful, disciplined M&A strategy which is underpinned by a pipeline of advanced opportunities, the group announces a capital raising which is expected to raise gross proceeds of c. $1 billion consisting of a subscription of approximately $730m from SBM and an institutional placing of up to $270m, with long-standing, technology-focused shareholder Sofina expected to participate in the placing in an amount of up to $85 million.”