Online fashion sensation Boohoo today bought 100% of its PrettyLittleThing subsidiary in a deal potentially worth £329 million after facing conflict of interest criticisms from a powerful stock market investor.
Shadowfall, a so-called “short-seller” who bets on share prices falling, had criticised the amount of money Boohoo was likely to have to spend on buying out PLT’s shareholders, who include Umar Kamani, son of the Boohoo founder and chairman Mahmud Kamani.
Boohoo bought its initial 66% of PLT from Kamani in 2017 and the brand beloved by Love Island stars has proved a success, but eyebrows have been raised over how it manages the conflict of interest with the founding family.
Shadowfall had claimed the eventual cost to Boohoo of the buyout could be almost £1 billion and said Boohoo may have to use £200 million of funds recently raised from shareholders to pay for it.
In a complicated deal today. Boohoo said it would pay an initial £269.8 million plus a further £54 million if Boohoo’s share price averaged 491p between completion and March 2024.
Kamani and his fellow PLT shareholders will be getting £161.9 million in cash, with the rest in Boohoo shares. Boohoo will issue £54 million of new shares to fund the latter element.
The cash will come from Boohoo’s existing balance sheet before its fundraiser.
Shadowfall had also claimed PLT's operating costs were kept artificially low because it was underpaying for shared services such as customer support from Boohoo. It also rents office space from another Kamani family business, the short-seller claimed.
Boohoo has countered that all services were provided on an arm's length basis.