Boohoo Group PLC (LON:BOO) has splashed out £55mln to buy the brand and intellectual property of Debenhams after the collapse of the department store group into administration last year.
For the online fashion retailer, which is not acquiring any stores or stock, the acquisition will see it branch out into the new categories of beauty, sport and homeware.
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Boohoo co-founder Mahmud Kamani called it a “transformational deal”, saying the aim is “to create the UK's largest marketplace”.
The AIM-listed company said it plans to expand the range of products sold wholesale via the Debenhams website by maintaining existing third-party brand relationships and adding new brands over time, while also selling its existing clothing brands.
With 6mln beauty shoppers and 1.4mln members of its Beauty Club, Debenhams’ beauty sales operate under a wholesale model, which Boohoo intends to continue, with new third-party beauty brands added “via the marketplace model”.
The deal will also add Debenhams’ clothing brands such as Maine, Mantaray, Principles and Faith.
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Debenhams.com, which generated revenues of roughly £400mln in its last full year, will be relaunched on Boohoo's tech platform between March and May and will continue to wind down alongside the department stores for an unstated agreed period.
Administrators of the 242-year old department store group, FRP Advisory, said last week they were still in talks with “a number of third parties regarding the sale of all or parts of the business”.
Boohoo expects no contribution to its own revenues over the remaining five weeks of its current financial year and some “modest start-up losses” said it will pay for the deal using its existing cash balances, which stood at £386.9m at the end of last month.
The shares were up 4% to 346.95p in mid-morning trade on Monday, though still down 16% from last year's all-time high.
Broker Peel Hunt said: "We see this as a sound acquisition strategically, taking boohoo into new product categories (home, beauty, menswear) and a much older demographic."
At the £55mln price tag, the analyst said "there is no risk here in our view", though "there will be questions over whether all beauty brands wish to continue to trade with the group and how well boohoo builds relationships with the leading sports brands for a wider athleisure and sport offer, but these are questions for the longer-term performance".
Analyst Susannah Streeter at Hargreaves Lansdown said: "Boohoo is turning its back on Debenhams entire store estate, seeing little value in bricks and mortar stores, as the shift to digital shopping intensifies during the pandemic.
"Instead it believes that the brands and website will help it create the UK’s largest marketplace and position it to propel into international expansion. It sees acquiring the home, beauty and sports assets sold by Debenhams as a big prize, allowing it to enter new markets, and expand from its pure fashion base."