Equities analysts at Deutsche Bank see a long-term benefit to ASOS PLC (LSE:ASC)’s decision to divest the majority of its Topshop and Topman ownership to the Danish holding company of Bestseller.
ASOS made the announcement, alongside a £250 million bond refinancing to help strengthen the balance sheet, on Thursday.
Topshop and Topman were valued at £180 million via the establishment of the joint venture, with ASOS receiving £118 million after expenses from Heartland.
“In our view, investors will be relieved by the actions being taken to reduce the debt burden both from the Topshop cash inflow and the better-than-expected EBITDA for FY24,” said Deutsche analysts.
The deal is expected to have a £10-20 million negative impact on EBITDA but will be increasingly EBITDA accretive over time.
“Accordingly, we see the shares reacting positively to this announcement despite the expected hit to FY25 forecasts,” said analysts.
Although Deutsche Bank cut its price target to 485p from 500p, they retained a buy rating on the stock.
Shares were swapping for 427.6p in late Friday trades.