Hut Group ends collaboration and £1.1bn option deal with Softbank

The Hut Group ends collaboration and £1.1bn option deal with Softbank due to ‘global macroeconomic conditions’

  • Option deal with Japanese conglomerate was agreed in May last year 
  • Analysts have previously said THG’s share price decline made the deal unlikely 

The Hut Group has terminated a collaboration agreement with SoftBank and ruled out the conglomerate exercising a call option to inject £1.1billion into the group’s tech arm.

The e-commerce group told investors on Tuesday that ‘in light of global macroeconomic conditions’ the option and collaboration agreement with Softbank’s SB Management has been cancelled ‘by mutual agreement’ with immediate effect.

THG shares fell by around 1 per cent to 69.7p in response to the announcement, bringing losses over the last year to 88 per cent.

THG’s share price has lost roughly 90% of its value in the last year 

Softbank and THG came to a £1.6billion agreement in May last year that saw the Japanese firm become a top shareholder in the Manchester-based company.

The deal saw Softbank pay an initial £516million for a stake of about 9.5 per cent in THG, alongside the right to invest another £1.1billion in technology division – Ingenuity.

It gave Ingenuity, which sells tech products to the likes of Homebase, a valuation of around £4.5billion at the time.

Softbank also took a 19.9 per cent stake in Ingenuity, which was being separated from THG.

The agreement was warmly welcomed by investors, with shares soaring more than 15 per cent.

However, in November last year JPMorgan analysts warned that the ongoing decline in THG’s share price meant Softbank was ‘unlikely’ to trigger the option.

The e-commerce firm has seen its share price plummet since IPO, despite short periods of respite when investors became more optimistic on promises of corporate governance changes or murmurs of private equity interest.

THG also announced today that it had completed the internal separation of its key trading divisions.

The firm said the separation ‘simplifies THG’s corporate divisional structures and provides it with material optionality and flexibility to enter into future strategic partnerships to generate value accretion for its stakeholders’.