UK ecommerce group THG to raise $1bn from investors led by SoftBank
THG, the UK ecommerce and technology company, is raising $1bn in fresh equity less than a year after its London listing, striking a series of deals with Japan’s SoftBank to turbocharge its expansion.
The Manchester-based group, formerly known as The Hut Group, said SoftBank would provide $730m as the cornerstone investor in the share sale. The purchase would give Masayoshi Son’s SoftBank a stake of about 10 per cent.
THG said the proceeds, which come after it raised $1.2bn through the sale of new shares during its initial public offering in September, would be used to “execute an advanced pipeline of strategic M&A”.
“We have got strong investment plans and a desire to run the company without leverage,” said THG co-founder Matthew Moulding, whose near 25 per cent stake in the company would be diluted through the deal.
THG said it would acquire Bentley Laboratories, a New Jersey-based prestige beauty developer, for $255m, the latest in a series of bolt-on acquisitions designed to bolster its health and wellness business.
The company also agreed to grant SoftBank a call option to acquire a 19.9 per cent stake in THG Ingenuity, a division that provides integrated ecommerce and logistics services for groups such as DIY retailer Homebase and consumer products group Nestlé, for $1.6bn.
The option implies an enterprise value of $6.2bn for the entire unit, the company said, despite a relatively modest £137m in revenue in its most recent financial year.
Moulding said the valuation was based on current revenues, the services that Ingenuity provides to the wider group, and the pipeline of opportunities. “We looked at the multiples [of sales] that were out there and, through various discussions with SoftBank, we managed to land at that value”.
It reserves the right to separate THG Ingenuity via an initial public offering or a trade sale, though Moulding stressed that this was not being contemplated. “We have no intention of selling any assets. The point of the separation was to create an entity in which SoftBank could invest”.
THG’s shares closed at 596p on Monday, down almost 4.5 per cent and a potential sign that news of the fundraising plans had leaked into the market. The new shares will be sold at that price, with other institutional investors including existing shareholder Sofina taking up the $270m that is not being bought by SoftBank.
The investment from SoftBank is coming from a fund called SB Northstar that the Japanese group has set up to invest in public equities. It is not linked to the SoftBank Investment Advisers, the unit which manages the $100bn Vision Fund and looks to invest in privately held businesses.
SB Northstar is managed by former Deutsche Bank trader Akshay Naheta, who masterminded SoftBank’s investment into Germany’s Wirecard two years ago. The entity is best known for its role in pumping up share prices in a number of technology companies last year, in an incident that led to SoftBank being dubbed the “Nasdaq whale”.
Moulding said he had negotiated directly with Naheta and his team “but anyone who knows SoftBank will know that Masa has the final say”.
Additional reporting by Robert Smith