FT27 Jul 2022 09:41
THG and SoftBank have terminated a longstanding agreement for the Japanese company to buy a $1.6bn stake in the British ecommerce group’s technology division, cutting off what was intended to be a valuable source of funding for the growing business. Confirming what many analysts and investors had long feared, THG said that “in light of global macroeconomic conditions the option and collaboration agreement has been terminated by mutual agreement among the parties with immediate effect”. The tie-up with a unit of Japanese billionaire Masayoshi Son’s investment vehicle caused great excitement when it was announced in May 2021 as part of a $1bn fundraising that made SoftBank one of the biggest shareholders in Manchester-based THG. It would have given SB Management — the unit of SoftBank that was granted the option — the right to acquire a 19.9 per cent stake in Ingenuity, the technology and logistics platform that powers THG’s health and beauty ecommerce business and provides services to many multinational consumer groups, at a strike price that implied an enterprise value of more than $6bn for the unit. Shares in THG — founded and run by entrepreneur Matt Moulding — rallied immediately after the transaction but those gains evaporated over a summer of negative headlines and growing investor questions about its strategy and governance. The losing streak continued into 2022 despite efforts to improve governance and transparency, as investor sentiment towards technology companies soured and rising raw material and energy costs put pressure on THG’s profit margins. On Tuesday, THG shares were trading at 69p, little changed on the day but almost 90 per cent lower than the 596p at which SoftBank acquired its stake in the group. At £872mn, THG’s entire market value is less than SoftBank had agreed to pay for a fifth of one division of the company. Analysts have cut back their forecasts and target prices for the group while a series of bid approaches, most recently from an investment vehicle employing one of THG’s own non-executives, have come to nothing. THG did not rule out future sales of stakes in Ingenuity or its other businesses. The ecommerce group said the separation of its key trading divisions into discrete legal entities was complete — in line with the 15-month timetable set out last year — providing it with “material optionality and flexibility to enter into future strategic partnerships to generate value accretion”.
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