Boohoo coup at Revolution Beauty turns ugly

Attempts by fast fashion retailer Boohoo to engineer a boardroom coup at Revolution Beauty took a dramatic turn yesterday as the board they ousted at its first AGM since floating in July 2021 was then reinstated in order to meet governance requirements.

Boohoo used proxy votes to remove Bob Holt (CEO), Elizabeth Lake (CFO) and Derek Zissman (Chair and Senior Independent Director) only for remaining director Jeremy Schwartz to reinstate them.

Schwartz said the decision to go against the shareholder vote held at the offices of City law firm Macfarlanes wasn’t taken lightly, but his priority is to restore the shares to trading following suspension due to a serious investigation into the conduct of previous management.

“The shares are expected to be restored to trading imminently, something which is undeniably in the interests of all shareholders, including Boohoo, as well as all of the Group’s other stakeholders,” he said.

Boohoo, which owns 26.6% of Revolution Beauty said in response that it regards Schwartz’s actions as “self-serving and not in the best interests of shareholders” going on to claim the the actions “contravened corporate governance best practice and disregarded the expressed opinion of the Company’s shareholders.” 

It went on the slam the decision as an “abuse of process”.

Boohoo wants to install former Matalan chief executive Alistair McGeorge to run the business and appoint Neil Catto as a director. 

“Boohoo remains committed to wholesale board changes at Revolution Beauty and the appointment of a new, majority-independent board with the right balance of skills and experience and believes that it is of paramount importance that the future board of directors of Revolution Beauty have direct and relevant experience of dealing with its customers.

Revolution Beauty shares were restored to trading on AIM at 7.30 this morning (28 June 2023). 

In a statement the board said: “The approach taken by Boohoo towards Revolution Beauty is nothing short of value-destructive, opportunistic and self-serving.  At a time when, thanks to management’s tireless efforts, the Company’s fortunes are significantly improved, with business back on track and restoration to trading on AIM occurring later today, boohoo is seeking to stage a board and management control coup without making a general offer, or paying a single penny, to independent shareholders of the company.”

It went on the warn that the ongoing turmoil could wreck attempts to fix the company and if accounts aren’t published by the end of August 2023, shares would again be suspended which would also trigger a breach of a banking facility.

The company also made an offer of dialogue with Boohoo. 

“As previously announced, the Board continues to be prepared to engage with Boohoo in good faith and in a constructive manner, to avoid the destruction of value for all shareholders.”

Given the response from Boohoo, that seems unlikely: “Boohoo fails to see how a board comprised entirely of directors appointed by each other, the majority of whom (including the chairman, CEO and CFO) have attempted to prevent shareholders from voting on their reappointment at an AGM, can claim to be acting in the best interests of shareholders.

“Boohoo remains committed to ensuring that Revolution Beauty has a majority independent board with the right balance of skills and experience and believes that it is of paramount importance that the future board of directors of Revolution Beauty have direct and relevant experience of dealing with its customers. 

“In light of the events of the last 24 hours boohoo also considers the current board of Revolution Beauty to lack not only this balance of skills and experience but also the ability to prioritise the interests of shareholders over their own self-interest. 

“Boohoo calls on the board to convene the requisitioned meeting without further delay and not to resort to further attempts to adjourn that meeting, once convened.”

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “There’s nothing beautiful about the spat between boohoo and Revolution Beauty, in fact it has turned downright ugly.

“A fashion for retail businesses to take stakes in their peers was always a recipe for friction and boohoo has certainly been throwing its weight around after taking a hefty stake in the cosmetics business.

“This led to unedifying and somewhat farcical scenes at the company’s AGM where boohoo was successful in ousting the senior management, only for the sole remaining director to bring in two non-executive directors who then reappointed the executives which had been forced out.

“Revolution Beauty’s contention that boohoo is aiming to take the company over by stealth through a boardroom coup without making an offer for the business may find some sympathy with minority shareholders.

“On the other hand, Revolution Beauty shares have been suspended for a long period thanks to issues with its accounts, so it is not like management have a lot of credit in the bank.

“The return from suspension today is welcome news for investors and the shares have surged higher, although, at 29p, it is a long road back to the issue price of 160p from its 2021 IPO.”

He added: “You can see why boohoo built its stake in Revolution Beauty in the first place. The brand does have strengths and spending on cosmetics is often fairly resilient in difficult economic conditions, while boohoo offers Revolution Beauty a very useful sales channel.

“For the sake of other shareholders, both parties could do with putting the war of words behind them and working together constructively, whatever concessions this might require on both sides.”