ASOS has sold a 75% stake in the Topshop and Topman brands to in a new joint venture deal with Heartland A/S, an nvestment and holding company representing the interests of Bestseller owner and ASOS shareholder Anders Holch Povlsen.
The deal will net ASOS around £118 million in cash and comes amid a wider financial restructuring for the online fashion giant that includes an offering of approximately £250 million in Convertible Bonds due 2028 and a concurrent partial cash repurchase of the outstanding £500 million 0.75% Convertible Bonds due 2026 issued by Cornwall (Jersey). It has also announced an extension of its existing facilities agreement with Bantry Bay Capital to May 2027 with an option for a 12 month extension.
ASOS purchased the Topshop and Topman brands, the former jewels in the crown of the collapsed Arcadia fashion empire, in 2021 for £265 million. That deal involved the purchased of the brand and online business only and resulted in the closure of all of Topshop and Topman’s physical retail stores. ASOS rolled the e-commerce sites into its own online platform,
The new joint venture was established following. a competitive sale process for the brands and will see Heartland indirectly hold a 75% stake in the joint venture for a £135m cash consideration. The remaining 25% stake will be held by current Topshop and Topman owner ASOS Holdings Limited, ASOS Holdings will have the right, at its sole discretion, to sell a further 5% interest in the Joint Venture to the Heartland shareholder for £9m.
After transaction fees, and pro-rata payment to US retailer Nordstrom International Limited, with whom ASOS had a retail partnership in the US, this represents a £118m net cash consideration for ASOS, which will be used to strengthen its balance sheet.
The joint venture will grant ASOS certain design and distribution rights for the Topshop and Topman brands in return for a royalty fee to enable it to continue marketing and selling the brands online. ASOS said it expected the deal to have a negative impact on EBITDA in the current financial year but it would be “increasingly EBITDA accretive over time”. The deal is subject to regulatory approval and is expected to complete in Q4 of this year.
It has said the deal will enable the growth of the brands and is promising a relaunch of them within the next six months. It also plans to expand their reach through selected wholesale partners, both online and offline.
Danish billionaire Anders Holch Povlsen is a long-term ASOS shareholder. Heartland indirectly owns 28% of ASOS’s shares and is therefore considered “a related party of ASOS” under the Listing Rules. Advisers JP Morgan have deemed the joint venture “fair and reasonable as far as ASOS shareholders are concerned”. Other significant shareholder in ASOS include British retail group Frasers, which owns a near 26% stake.
ASOS CEO José Antonio Ramos Calamonte, said of the deal: “We’re pleased to be making this announcement today which is an important step in ASOS’ continued transformation. The joint venture and the launch of the refinancing will accelerate our strategy to both offer customers the best and most relevant product and to turn ASOS into a company that delivers sustainable, profitable growth.
“Topshop and Topman have made good progress since we acquired the brands in 2021. The new JV with HEARTLAND is testament to the brands’ potential and the partnership will help bring Topshop and Topman to more customers globally. ASOS will continue to focus on what we do best – designing the best fashion and providing a destination for style. Through the Joint Venture, new opportunities, both online and offline, can be explored and we are excited to continue to be part of the brands’ future while also realising the best value structure for ASOS shareholders today.”
Speaking on its wider “Back to Fashion” strategy, which is focused on “bringing the best fashion and most inspirational experience to its twenty-something fashion-loving customers and delivering sustainable, profitable growth”, Ramos Calamonte said “good progress” had been made.
For FY24, ASOS expects adjusted EBITDA at the top end of consensus estimates, sales slightly below guidance, with all other guidance as set at FY23 year end remaining unchanged, subject to the impact of this latest transaction. A full update on its strategy and financial guidance will be given at its full year results announcement in the coming months.
