The Hut Group (THG), the online retailer empire run by billionaire Matthew Moulding, has struck a complex joint venture deal with Japanese investment giant SoftBank that values a “yet to be formed” technology division of THG at $6.3bn (£4.5bn).
The deal, announced on Monday, values THG Ingenuity, which Moulding described as a “social media influencer platform” used to promote products, at about the same value that the whole company floated at last year.
Under the terms of the $1.6bn deal SB Management, a division of SoftBank, has bought an option to buy a 19.9% stake in THG Ingenuity that values the division at $6.3bn. SBM will also take a $730m stake in The Hut Group by taking part in a share placement.
In a statement announcing the highly unusual deal, THG, which is based at Manchester Airport, said: “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.”
The company sought to reassure shareholders that “the separation of its key businesses will maximise shareholder value”.
Moulding, who owns 25% of THG shares, said it was unclear how the investment would effect the overall valuation of the parent company, which has a stock market capitalisation of £5.8bn. When asked about the value of his personal shareholding, Moulding said: “I’m pretty rubbish at tracking my stake.”
He is sitting on a huge paper fortune after he collected an £800m windfall when the company’s share price soared in the months after its stock exchange listing. His stake was valued at about £1.5bn based on THG’s closing share price of 596p on Monday.
THG owns a range of online beauty and nutrition brands including Lookfantastic and Myprotein, and provides e-commerce technology to firms such as Unilever.
THG has been a lockdown winner. Its sales rose more than 40% in 2020 to £1.6bn. The company, however, made a pretax loss of £535m after it booked a non-cash charge of more than £300m to reflect the accounting value of share awards to Moulding and its wider staff before the IPO.
Moulding, who founded THG in 2004, said the SoftBank deal would provide Ingenuity with “an unparalleled global growth opportunity”.
“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,” he said. “The capital raise will provide meaningful capital to accelerate our strategic growth ambitions across our whole business.”
Moulding described Ingenuity as a technology platform that companies can use to sell brands across the world, by using its team of social media influencers. “If you’re sat there and you have a brand you want to sell to the world [you should speak to THG Ingenuity],” he said in a media call to explain the deal.
THG also announced a deal to buy Bentley Laboratories, a New Jersey-based developer and manufacturer of skincare and haircare products.
Moulding declined to comment on THG’s decision to pull out of a £200m 10-year deal to sponsor Manchester United’s training kit. Reports suggested that THG had pulled out over concerns about the supporters’ campaign to boycott the club’s commercial partners in protest at the Glazers’ ownership of the club and their support of the proposed European Super League.
The branding of Myprotein, a Cheshire firm owned by THG, was due to appear on United’s training kit and replace the branding of AON, sponsors of the club’s Carrington training centre.
Moulding said he could not comment on the sponsorship deal, and said he did not have strong opinions on the now-scrapped plans for the controversial breakaway league of the richest clubs.