boohoo Group PLC rescues Arcadia’s Dorothy Perkins, Wallis, Burton for £25mln

boohoo Group PLC () announced it has agreed to acquire Arcadia’s Burton, Dorothy Perkins and Wallis brands out of administration for £25mln.

The deal only includes the e-commerce and digital assets and associated intellectual property rights, including customer data, related business information and inventory, so shops are out of the picture, with hundreds of jobs on the line.

READ: boohoo confirms talks to buy Arcadia’s Dorothy Perkins, Wallis, Burton

The fast-fashion online retailer said this provides a significant opportunity to grow market share across a broader demographic as well as strengthening its menswear proposition with Burton.

The integration period is expected to last for up to three months with one-off transaction and restructuring costs of £10-15mln.

The former high street brands had over 2mln active customers in 2020 and generated £428mln of revenues and an underlying loss of £14mln in the year to August 29, 2020.

The AIM-listed firm is financing the deal with its own cash resources, which stood at £387mln in December before buying Debenhams for £55mln last month.

This is the final deal to wrap up the Arcadia administration, which folded with an estimated £350mln pension black hole and was handed to , putting up to 13,000 jobs at risk.

Last week, boohoo’s competitor () acquired Arcadia’s Topshop, Topman, Miss Selfridge and HIIT brands for £265mln, also leaving all stores behind.

Lots of people seem to think the Boohoo/Debenhams & ASOS/Topshop deals are similar.

Here is a very basic model of assessing risk/opportunity. The bottom left box is least risky, top right is most risky.

ASOS deal = mostly the bottom left box.
Boohoo deal = the other 3 boxes. pic.twitter.com/ib4KKzHHGB

— dan barker (@danbarker) February 1, 2021

Only a few weeks before, Arcadia’s Evans was sold to Australian firm City Chic Collective for £23mln, although the deal did not include the plus-sized clothier’s store network but just the brand, its customer base and inventory.

“The difference in approach this time is that boohoo has entered into a transitional services agreement, which will see it take over the brands while they are still trading, rather than a ‘hard stop’ and restart, which means that the £25.2mln acquisition costs also includes an element of stock,” analysts at Peel Hunt commented.

“We… would expect a strong build in revenues in the run-up to peak. There is a logic to today’s transaction, which fits well with the recent Debenhams portfolio of brands and continues to bring more focus to menswear.”

Shares in boohoo shed 3% to 352p on Monday at the opening bell.

–Adds analyst comment, shares–