Japanese technology investor takes 9% share
The Hut Group last night struck a deal with Softbank that will lead to the Japanese conglomerate investing $2.3 billion in one of Britain’s fastest-growing technology companies.
Softbank, run by Masayoshi Son, the richest man in Japan, is immediately buying $730 million in new shares in THG as part of a $1 billion cash call.
Among the other institutions taking part in that placing is the Belgian investor Sofina, a long-term backer of THG, which is buying a further $85 million worth of shares.
Softbank’s investment will leave it with a share of about 9 per cent in the Manchester-based group.
Investors are paying 596p for the new shares, the same price at which they closed last night, having dropped nearly 5 per cent in trading yesterday. A host of the City’s biggest banks are advising on the fundraising, including Barclays, Goldman Sachs, Citi and Jefferies.
The shares were floated at 500p before last September’s eagerly anticipated initial public offering. Despite some initial concerns about corporate governance the share price peaked above 800p in January but it has stumbled of late as the rally in technology stocks has started to fade.
The Japanese giant, a prolific investor in tech and internet companies, is to invest a further $1.6 billion in THG’s ecommerce platform.
The Hut Group was started by Matt Moulding in 2004, originally selling DVDs online. It has since grown to have more than 200 separate websites including its Myprotein brand.
It also has a technology business, THG Ingenuity, that helps other brands and retailers to sell their products online. The division is highly rated by City analysts and investors.
The deal with Softbank will lead to THG spinning Ingenuity into a separate company by the end of next summer. The Japanese investor will take a 19.9 per cent stake at a valuation of $6.3 billion. The group as a whole is currently valued at £5.8 billion.
Moulding, THG’s chief executive, has built his company into a multibillion-pound business through a series of acquisitions. He said that the extra firepower would support the “continuation of the group’s successful, disciplined M&A strategy”, adding that he and his team had already put together a “pipeline of advanced opportunities”.
Alongside yesterday’s fundraising THG announced the acquisition of Bentley Labs, a New Jersey-based maker of skin creams and hair care products, for $255 million. THG is one of Bentley’s biggest customers, developing and manufacturing products for its various brands, including Perricone MD, a skincare product. Regulators in the United States are expected to approve the deal shortly and THG is forecasting that the acquisition will add $35 million of sales and $7 million of underlying profits to its results for the rest of this year.
The alliance with Softbank, announced after the market closed yesterday, is likely to spur heavy trading in THG shares today.
Softbank is one of the world’s largest investors in technology through its $100 billion Vision Fund, backed by capital from Saudi Arabia.
Son, its founder, is known for taking large bets on his gut instincts and is best known for his early investment in Alibaba, the Chinese ecommerce giant, which has delivered a profit of more than $100 billion. Softbank has a number of misses to its credit, including its calamitous backing of WeWork.
Moulding last night said that he had held talks with Softbank about potential investments and collaborations before and after last year’s listing. Discussions had become “extensive and frenetic . . . over the past couple of weeks”, he added.
Although Softbank is buying a direct stake in THG, the “real value for them is to get closer to our technology”, Moulding said.
He added that Softbank wanted the Ingenuity division to work with companies in which it had invested, but declined to provide details on potential partnerships. Ingenuity helps brand owners to sell their wares to consumers around the world by setting up their websites, devising marketing strategies and handling payment and deliveries among other services. Moulding cast the $1.6 billion investment in the ecommerce platform as a vindication of the controversial governance structure that gives him the right to reject a hostile offer for three years after the float.
“The valuation that has been placed on our technology is the same level as the whole group just six months ago,” said Moulding. His supercharged voting rights were a “protection” for investors against the company being sold too cheaply.