NEXT plc to acquire British brand FatFace for £115.2m: What it means for online retail

In a significant move that underlines the strategic alignment of two prominent UK-based retailers, NEXT plc, a trailblazer in the online fashion retail space and FTSE 100 constituent, has announced its decision to acquire the family lifestyle clothing brand, FatFace. The deal is pegged at an equity value of £115.2m and is inked with a consortium of financial institutions.

Key Highlights

• Payment Structure: The financial terms involve a blend of cash payments, new NEXT share issuances, and an equity rollover by FatFace’s management into the new consolidated structure. The acquisition won’t substantially alter the profit before tax or EPS for NEXT in the current financial year.
• Ownership Details Post-Acquisition: Upon deal closure, which is on the horizon in the coming weeks, NEXT will be the major stakeholder with 97% equity. The management team at FatFace will retain a 3% stake, complemented by a performance-linked equity scheme.
• Operational Autonomy: In a bid to uphold the essence of FatFace, the brand will maintain its management independence. Its headquarters will remain in Havant, Hampshire, and it will continue operating with its existing Board of Directors.
• Online Transition: FatFace, which has been a part of NEXT’s online platform as a LABEL brand since 2016, is set to transition its digital operations to NEXT’s renowned Total Platform within a year.

Insights on FatFace’s Recent Performance

FatFace, under CEO Will Crumbie’s stewardship, has witnessed a robust trading phase. The previous year’s data up to 27 May 2023 showcases impressive figures with sales reaching £282m and a pre-tax profit of £19.5m. Digital sales channels contribute a significant 40% to these sales, indicating a balanced multichannel retail strategy.

Further Context

NEXT plc, headquartered in Leicester, holds a dominant position with about 460 stores in the UK and Ireland and has marked its online footprint across 70 countries. Their brand range is vast, with over 700 offerings, including FatFace.

FatFace distinguishes itself as a British, family-centric clothing brand with a unique heritage. Their catalogue spans across various categories like women’s, men’s, kids’ wear, footwear, and accessories, adhering to a philosophy of style, quality, and sustainability. It operates through a mix of physical stores (over 180 in the UK and Ireland and 25+ in the US and Canada) and a blossoming digital presence, boasting 1.8m active patrons.

Advisory Roles

Rothschild & Co and Addleshaw Goddard lent their financial and legal expertise to FatFace and the sellers. In contrast, NEXT availed the advisory services of EY and Eversheds Sutherland for this acquisition.