Shares in THG surged on Tuesday after the owner of The Hut Group struck a multi-billion deal with Japan’s Softbank, and announced a $1bn fundraising.
Under the terms of the financial and trading partnership, the conglomerate – which specialises in e-commerce and technology companies – will invest a total of $2.3bn in THG.
The deal centres around THG Ingenuity, the e-commerce giant’s end-to-end technology services unit. The business will be spun into a separate company by the end of next summer, with Softbank having the option to acquire a 19.9% stake for $1.6bn, valuing Ingenuity at around $6.3bn.
THG founder and chief executive Matthew Moulding said the deal recognised “both the capability and inherent value” of the proprietary technology platform.
Moulding saig: “The trading partnership is particularly exciting, providing Ingenuity with an unparalleled global growth opportunity. Furthermore, the combination of the acceleration of growth within Ingenuity and its separation into a distinct entity will enable THG to unlock significant incremental shareholder value over time.”
Softbank will also immediately purchase $730m of new shares in THG as part of a wider $1bn fundraising. The purchase, at 596p per share, will give Softbank a stake of around 9%. Shareholder Sofina, a Belgian investment firm, has committed to buy up to $85m shares.
Moulding said: “The capital raise will provide meaningful capital to accelerate our strategic growth ambitions across our whole business.”
As at 1030 GMT, shares in THG were ahead 13% at 670.5p.
Wayne Brown, analyst at Liberum, said: “Softbank’s investment is not just a financial investment, but is an operational deal, which underlines not just the strength of the Ingenuity platform. Softbank will clearly benefit by leveraging the Ingenuity assets to super charge growth across their portfolio and for Ingenuity will provide scale and set-change for growth.
“The investment puts a high valuation on the Ingenuity platform IP and Ingenuity businesses and assets, at £4.5bn, around 63% of the currently enterprise value of the THG Group. This is before the additional value that will be bought in by the potential commercial partnerships between THG and Softbank’s investee companies, which include a long roster of technology-driven companies that deliver online fitness classes, develop plant-based meats, deliver groceries or simply sell consumer products online.”
James Grzinic, analyst at Jefferies, said: “This is a good day for THG shareholders. The group has raised considerable new funding while providing a very strong valuation underpinned to Ingenuity, and gaining a major commercial collaboration with a digital global champion like SoftBank. The funds raised are being swiftly redeployed in further strengthening the vertically integrated model across the group. Our price target increase to 920p partly reflects the higher option value put by Softbank on Ingenuity.”
THG, which along with Ingenuity sells own- or third-party branded goods to consumers via a portfolio of international websites, floated last September at 500p and has a market value of around £6.5bn. The firm is not included in any of the major indices, however, because of its limited free float and the founder share retained by Moulding.
