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British clothing retailer Next has agreed to buy a 25 percent stake in upmarket smaller rival Reiss and has an option to secure majority control, it said on Wednesday.
The UK clothing sector has been hammered by Covid-19 lockdowns. With stores shuttered, retailers have had to rely on their online channels.
Next has been a resilient performer during the pandemic thanks to its huge online business and last year CEO Simon Wolfson said the crisis would throw up acquisition opportunities.
Last May, Next expanded its beauty business by taking on five former Debenhams beauty departments, while in September it established a joint venture with Lbrands to sell Victoria’s Secret and Pink products. In January, Wolfson tried and failed to buy the stricken Topshop brand which eventually went to ASOS .
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Next will pay £33 million ($46 million) for the Reiss stake and also make a debt investment of £10 million, financed from cash resources.
It has an option to acquire an additional 26 percent equity interest at pre-agreed terms by July 2022.
Reiss is majority owned by US private equity firm Warburg Pincus, with the founding Reiss family retaining a minority holding.
It’s CEO is Christos Angelides who previously worked for Next for 28 years.
Reiss operates in 14 countries from 79 stores, 104 concessions and via wholesale and franchises. It reported turnover up 22 percent to £227.4 million in the year to February 1 2020.
Next said Reiss will retain its management autonomy and creative independence.
The deal will see Reiss’s online operations, both in the UK and overseas, contracted to Next through Next’s Total Platform business.
Total Platform will also provide warehousing and distribution services for Reiss’s retail, franchise, wholesale and concession businesses.
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“We are excited to see what can be achieved through the combination of Reiss’s exceptional product, marketing and brand building skills with Next’s Total Platform infrastructure,” said Wolfson.
By James Davey; Editors: Kate Holton and Emelia Sithole-Matarise
