Boohoo Group PLC (LON:BOO) has acquired the remaining 34% stake in subsidiary Pretty Little Thing (PLT) for a combination of cash and shares that could potentially rise to £323.8mln.

The online fashion retailer will pay an initial £269.8mln to the minority owners, being chief executive Mahmud Kamani’s son Umar Kamani and chief operating officer Paul Papworth, who are both continuing in their roles running the subsidiary.

REACTION: Analysts say Boohoo acquisition a very shrewd move

Boohoo announced the acquisition just days after a report was issued by hedge fund ShadowFall that criticised the company’s accounting for PLT and estimated that it would cost around £1bn to buy out the minority stake.

An up-front cash payment of £161.9mln will be funded from the £240.7mln of net cash that the group had on its balance sheet at 29 February, meaning it will still retain over £350m of net cash post-transaction.

The remaining portion of the initial consideration is being paid in shares, of which half are issued with a lock-up period of 18 months and the other half for 24 months. 

A further £54mln-worth of shares will be paid if the group’s share price averages 491p pence per share “over a six-month period between completion and a longstop date of 14 March 2024”. If this condition is not met, the consideration will lapse.

The AIM-listed company expects the acquisition to be significantly earnings enhancing on a fully diluted basis with immediate effect, having grown revenue 38% to £516mln in the year to 29 February, 42% of group sales, and generated a total post-tax profit of £86mln, of which the group’s portion was £69.9mln.

Boohoo shares, which had wobbled a little in recent days after the Shadowfall criticism, were up 18% to 394.4p by lunchtime on Thursday.

Analysts at broker Liberum said “This is a very shrewd and positive move by Boohoo’s management team that removes one of the major cloud’s that has hung over the equity story.”

  –Adds shares and broker comment–