British clothing and homewares retailer Next (LSE: NXT) has agreed to purchase distressed high street fashion chain Fatface for £115 million, Sky News↗︎ first reported earlier this week.
The Deal marks Next's latest foray into snapping up struggling rivals as the retail shakeout continues in the UK. It follows similar acquisitions by Next of Made.com, Joules, and Cath Kidston during the pandemic.
Next said the part cash, part shares FatFace deal is expected to complete in the coming weeks. The company will then own a 97% stake in FatFace, with management retaining the remaining 3% shareholding.
FatFace trades from around 180 stores nationally and specialises in casual family clothing. However, it has come under pressure as cautious consumer spending weighs on discretionary categories.
Next has swooped amid the retail carnage to pick up vulnerable brands it believes it can turn around. By acquiring companies like FatFace, it can also take advantage of lower property valuations to grow its physical footprint.
The fashion group stressed FatFace will retain autonomy and creative independence under the takeover. But it plans to migrate the business onto its Total Platform online in the next year, likely boosting FatFace's digital proposition.
Next said it does not expect the deal, which still requires shareholder approval, to have material impact on its profits this financial year. FatFace CEO Will Crumbie and other management will remain with the business after the change of ownership.
Analysts said the acquisition allows Next to capitalise on the major shifts underway in UK retail, as more nimble players seize opportunities from distressed incumbents mired in outdated business models.
Next is rapidly evolving into a conglomerate of retail brands catering to various demographics and price points. FatFace provides another addition targeting mainly middle income families.
The deal offers Next both strategic synergies and property assets from FatFace's sizeable store network. But significant investment will be needed to re-energize the chain amid excruciating high street conditions.
Next shares fell 1.1% to 6,850.00 pence each on Friday afternoon in London.
- Next confirms takeover of Fatface in £115m deal↗︎ (BBC)
- Next adds Fat Face to stable of brands for £115mn↗︎ (FT)
- Next snaps up FatFace for £115m↗︎ (Retail Gazette)
