Retail veterans could cash in on £4.5bn Hut Group flotation

Retail veterans including former bosses of Tesco, Debenhams and Matalan could all cash in under a potential £4.5bn flotation of online business The Hut Group which could be announced this week.

The Manchester-based firm owns online retail sites Lookfantastic, Glossybox, Zavvi and Coggles, beauty brands including ESPA and Illamasqua and sports nutrition brand Myprotein.

The Hut Group also owns several Manchester hotels including King Street Townhouse and provides IT, logistics and marketing services to businesses including Nestlé, Nintendo and Proctor & Gamble. It employs about 7,000 people around the world and has just built a $1bn new campus near Manchester airport which it says has room for 10,000.

Founded in 2004 with £500,000 in savings by former Phones4u executives Matt Moulding and John Gallemore to sell CDs online, the group expanded rapidly by exploiting a now closed tax loophole which allowed companies to avoid VAT on small goods, including CDs and DVDs, by posting them to the UK from the Channel Islands.

Amid heavy competition from Amazon, they moved on to acquiring niche sites which were not directly in competition with the US online specialist and capitalising on their IT and logistics assets.

Sales have grown from £80m in 2010 to £1.14bn in 2019. Last year, the group raised almost £1bn in debt and equity to fund expansion and earlier this year it bought two cargo planes for £80m to ensure it could transport goods internationally when conventional flights were grounded.

Founder Moulding, now the company’s executive chairman, could be in line to receive £700m under a longstanding incentive plan which would pay out if the company reaches a valuation of £7.25bn by December 2022, according to Sky News which first reported the latest flotation plan.

Early backers included Balderton Capital, which also invested in Wonga and Betfair, and a string of retail veterans including former Tesco chief executive Sir Terry Leahy, former Matalan boss Angus Munro and former Debenhams chief executive Terry Green as well as former House of Fraser investor Tom Hunter all of whom retain shares.

Newer backers included private equity firms KKR, BlackRock, Merian Chrysalis Investments and fund manager Old Mutual Global Investors.

The Hut Group has geared up for a stock market flotation on several occasions, but has previously opted for a private deal instead.

This time around between £500m and £900m of new shares would be sold to institutional investors while some existing investors will cash out.

Source: Read Full Article