Amid Investor Criticism, Boohoo Buys Out PrettyLittleThing in $332 Million Deal

Boohoo has snapped up the remaining 34% stake in PrettyLittleThing just days after the British e-tailer became the subject of criticism over a potential deal.

Boohoo today announced that it paid an initial 269.8 million pounds, or about $332.18 million at current exchange, for the online fast-fashion site owned by Paul Papworth and Umar Kamani.(Kumani is the son of Boohoo founder and chairman Mahmud Kumani.)That value could potentially rise to 323.8 million pounds, or $398.67 million, contingent on share prices.

Three years ago, Boohoo had acquired a 66% stake in PrettyLittleThing, which was launched in 2012 by Kumani and his brother Adam. In the past year ended February, the brand has generated sales of 516 million pounds, or $635.31 million, compared with 55 million pounds, or $67.72 million, in the same period in 2017.

According to Boohoo, the acquisition creates “significant value for the group’s shareholders,” and marks an “important further step towards achieving its vision to lead the fashion e-commerce market globally by accelerating full ownership of a brand that is in high growth with enormous growth potential ahead of it.”

The move comes two days after a report from hedge fund and Boohoo investor ShadowFall accused the company of misleading shareholders about its cash flow following a recent fundraising effort that bolstered Boohoo’s balance sheet by 200 million pounds, or $246.24 million. ShadowFall’s report indicated that there is reason to believe this money could be handed over in dividend distributions or buyout proceeds to Umar Kamani as part of a Boohoo-PrettyLittleThing merger.

In its 54-page memo, Shadowfall further claims funds from Boohoo’s share placement could be used to purchase e-commerce fashion site I Saw It First, which is majority-owned by Jalal Kamani, the brother of Boohoo’s founder.

Shadowfall also raised concerns that an acquisition of PrettyLittleThing at the current time would see the e-tailer sold cheap — the hedge fund suggested a PrettyLittleThing takeover could cost nearly 1 billion pounds, or $1.23 billion, in 2022.

As of Thursday, Boohoo’s stock surged nearly 15% to $384.60 on news of the acquisition.

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