Boohoo has named a third board member for its attempted takeover of Revolution Beauty, in spite of the embattled beauty brand’s critical response to the proposal.
The fast fashion retailer has proposed that former THG Beauty CEO Rachel Horsefield should join the independent leadership team.
Horsefield left THG in 2022.
Alistair McGeorge, Non-Executive Chair of The Original Factory Shop, and Neil Catto, a former Executive Director for Boohoo, were previously put forward for the reconstituted management team.
McGeorge and Catto would serve as Interim Executive Chairman and CFO respectively.
On 20 June Boohoo announced plans to vote against the reappointment of board members Bob Holt, Derek Zissman and Elizabeth Lake at the beauty brand’s AGM on 27 June.
The Manchester-based company, which is Revolution Beauty’s largest shareholder, expressed concerns that the current leadership team was not delivering shareholder value.
Revolution Beauty slated the retailer’s takeover proposal as “value-destructive, opportunistic and self-serving”.
The beauty brand described Boohoo's actions as a “cynical attempt” to seize control of the company that did not have a robust financial guideline.
It stressed that Boohoo’s strategy was “reckless” as a result, and would also require unanimous support from other shareholders of the company.
“The current directors believe that Boohoo's actions create considerable risk to the prompt restoration of trading in the company's shares and its stakeholder relationships, and appear calculated to destabilise rather than support the business,” Revolution Beauty said in a statement at the time.
Revolution Beauty’s 2022 financials were published in May this year after a lengthy delay
The audit was initiated after the brand failed to publish FY22 accounts in February last year, and was conducted by Revolution Beauty’s auditor BDO.
The Big Four accountancy firm’s report discovered that co-founders Adam Minto and Tom Allsworth had made personal loans of around £1m to distributors.
BDO also raised concerns about sales made to Revolution Beauty’s three key distributors in February 2022, the final month of its full-year accounting period for 2022.
The distributors have not been named, but various discrepancies were identified in the investigation such as the sales volumes, timing, terms and rationale.
Revolution Beauty is now seeking to recover funds relating to the “exceptional costs” it incurred as a result of the situation, and has sent a letter of claim to Minto.
The legal filing alleges that Minto’s actions contributed to delay in the audit of Revolution Beauty’s FY22 results, as well as the subsequent suspension of the company's shares.
After the lengthy delay Revolution Beauty’s 2022 financials were published in May this year.
Pre-tax loss increased from £17.8m to £44.9m during the period, while operating loss amounted to £38.9m due to Revolution Beauty’s acquisition of Medichem.
Sales increased by 35% to £184.6m, however, but were below the £194m originally forecasted by the group.
“Whilst these results are significantly below that forecast by the previous management team to the market, they nevertheless reflect a robust business with a strong brand, loyal following, and significant potential in terms of both sales and profitability,” said Zissman at the time, who currently serves as Non-Executive Chairman.
Separately, Fraser Group, owned by retail mogul Mike Ashley, has increased its stake in Boohoo by 5% this week.
The owner of Flannels and Frasers saw Boohoo as an attractive proposition with its “laser focus on young female consumers”.
