Online fashion retailer raises £198m through share placing

Boohoo, the Manchester-based online fashion group, has raised £197.7m through a share placing with existing and new institutional investors.

The proceeds will form a ‘war chest’ of funds specifically for merger and acquisition activity post the COVID-19 lockdown.

Boohoo anticipates that there will be many opportunities once the dust has settled on a new landscape in the fashion retail sector.

The placing was conducted through an accelerated bookbuild.

Zeus Capital and Jefferies International acted as joint global coordinators and joint bookrunners.

Boohoo, which announced the placing late yesterday afternoon, (May 14) said it 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.

The group said it continues to review a number of possible merger and acquisition opportunities and will update shareholders as required.

As at February 29, the group had audited net cash of £240.7m.

Since year end the group has remained cash generative.

Following the placing, Boohoo said it will have an even stronger balance sheet to help accelerate its vision to lead the fashion e-commerce market globally.

It said it has demonstrated that its platform is capable of integrating high-quality fashion brands.

The recent acquisitions of the Karen Millen and Coast brands evidence its successful transition of brands to a pure online proposition on its scalable multi-brand platform, plugging them into its test and repeat model, and leveraging the group’s infrastructure and insight into the fashion e-commerce market, it said.

And the group’s earlier acquisitions of the NastyGal and MissPap brands, it said, demonstrate its ability to develop and grow brands successfully.

The group sees significant opportunity to replicate this success globally.

At the time of Boohoo’s preliminary results announcement on April 22, it noted that, since mid-March, trading had been mixed, as a result of the impact of the COVID-19 pandemic, initially with a marked decrease in the year-on-year growth rate.

Performance then improved during April, delivering improved year-on-year growth of group sales.

Boohoo said, however, that it is pleased to update shareholders that trading into May remains robust, although it remains cautious regarding the outlook, as a result of the uncertainty caused by the COVID-19 pandemic, together with the impact of lifting lockdown restrictions and the potential influence on competitive behaviour for the remainder of the year.

The Manchester corporate team of Addleshaw Goddard, comprising Roger Hart and Lucie Alker, advised investment banks Zeus Capital and Jefferies on the deal.

TLT was Boohoo’s legal adviser.

Russ Mould, investment director at Manchester investment platform AJ Bell, said: “While most companies are tapping investors for more cash simply to keep going during the crisis, there are a select few who can afford to think more strategically.

“Following in the footsteps of Auto Trader which recently made a similar move, Boohoo is the latest company to ask shareholders for cash so it can have a war chest to make acquisitions.

“Now is a perfect time for the strongest companies to buy weaker players, thereby extending their reach and market position.

“What’s really interesting is that Boohoo has convinced investors to buy more stock only days after its share price hit a new record high of 370.4p.

“While the placing price of 340p is a small discount, investors are still paying a high price to get a slice of Boohoo, suggesting that they really believe in its potential to keep growing very fast.

“It is no stranger to making deals, having previously bought assets from Karen Millen, Coast and Nasty Gal.

“Asking for such a large sum of cash would suggest that Boohoo is confident that opportunities will emerge as more retailers struggle to stay alive.

“A near-£200m fundraise will now enable Boohoo to act fast should there be a chance to buy something out of administration.”

He added: “There are always risks with buying other companies and there are longer term questions about whether there will be a consumer backlash against its fast fashion model.

“After all, the idea of constantly turning around new designs and customers wearing them once and chucking the clothes afterwards doesn’t resonate well with the ethical values increasingly being embraced by the younger generation.

“For now, investors seem to like the fact that Boohoo is trading well through the crisis and acquisitions could help it to broaden its appeal to older people and have a more international presence.”