Online fashion giant Asos (ASC.L) confirmed it is “in exclusive discussions” with the administrators of Sir Philip Green’s Arcadia empire to acquire its Topshop, Miss Selfridge, Topman brands, as well as fitness brand HIIT.
Asos shares were up roughly 4% Monday morning in London.
“The board believes this would represent a compelling opportunity to acquire strong brands that resonate well with its customer base,” Asos said in a statement.
“However, at this stage, there can be no certainty of a transaction and Asos will keep shareholders updated as appropriate. Any acquisition would be funded from cash reserves,” it added.
Sky News reported that Asos will pay more than £250m ($343m) for Topshop.
“Asos clearly wants to just scoop up the cream from Sir Philip Green’s retail trifle, leaving the more unappetising remains left out for others to pick over,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“Brands like Burton and Dorothy Perkins are likely to be a much harder sell, in a very competitive mid-market,” she added.
She also warned that if the Asos deal goes through, it means “great swathes of the high street will be left empty. Spaces in prime locations are likely to be snapped up, but large shells of stores in towns and cities up and down the country are likely to stay boarded for some time.”
“Bricks and mortar rivals like Next, Marks and Spencer and House of Fraser could benefit from the lack of high street competition, but with fewer stores to go to town for, it’s not going to help footfall bounce back once lockdown ends,” she said.
Arcadia went into administration in November last year, and its various brands are is currently being auctioned off, including Evans, Burton and Dorothy Perkins.
Asos joins a list of bidders for the fashion house, with the likes of Authentic Brands, the US owner of Barneys department store, and online rivals Shein and Boohoo (BOO.L) thought to be in the running. Next (NXT.L) pulled out of the auction over the weekend.
Arcadia employed as many as 13,000 people across almost 50 UK stores when it collapsed.
COVID-19 has seen many companies buckle under the economic pressure it has caused, especially as many high street brands were already struggling pre-pandemic due to declining footfall, increased online competition and rising business rates.
Green built the company into a retail Goliath through a series of acquisitions in the early 2000s. At its height, the company’s brands were a stalwart of high streets across the country and TopShop — Arcadia’s crown jewel — was fronted by model Kate Moss. Arcadia’s success helped Green amass a fortune of almost £5bn at his height.
However in recent years, Green was embroiled in the scandal surrounding the collapse of BHS, which he sold for £1 in 2015. MPs voted through a non-binding motion calling for his knighthood to be stripped and Green ultimately agreed to pay £363m to address a shortfall in BHS’ pension scheme.
Meanwhile, Britain’s ongoing lockdown boosted profits at ASOS despite rising costs, as the pandemic pushes more shopping online and leads to lower return rates.
Asos said earlier this month that ongoing restrictions to curb the spread of COVID-19 were likely to add net £40m to its bottom line in the first half of 2021. The boost comes as more customers spend more online and return rates fall, it said.
It has also aid Britain’s post-Brexit free trade agreement with the EU will add £15m to its costs, highlighting the ongoing challenges businesses face navigating the new red tape and costs of Brexit.
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