Frasers Group, the sportswear and apparel giant controlled by Mike Ashely, has agreed to buy a £10 million ($13 million) stake in THG as part of a fundraising that will enable the online retailer to spin off its unprofitable tech unit Ingenuity.
THG’s founder and CEO, Matt Moulding, has also committed £10 million to the effort, which raised a total of £95.4 million.
The London-listed firm said it would become a “simpler, cash-generative business capable of paying future dividends” after the demerger from its Ingenuity division.
THG’s stock has fallen 90% since going public on the London Stock Exchange in September 2020. The company, formerly known as The Hut Group, had an opening valuation of £5.4 billion, which turned Moulding into a billionaire at the time, but the stock’s slump has left THG with a current value of £688 million.
After the spin-off, THG will continue to operate two businesses—beauty and nutrition. Ingenuity, the company’s software and logistics arm, will become a standalone venture.
Frasers’ “strategic investment” in the e-commerce firm follows just three months after it had acquired THG’s portfolio of luxury goods websites for an undisclosed sum and reached a multiyear agreement with Ingenuity.
Frasers has grown to become one of the U.K.’s top retailers since it was founded by Ashley as Sports Direct in 1982. From a single store in Maidenhead, Ashley grew the business to a vast network of 1,551 stores spread across more than 20 countries.
Under his stewardship, the group acquired dozens of companies, giving it a portfolio of sports brands today that includes Everlast, Lonsdale, Slazenger and Sondico alongside retailers House of Fraser, Evans Cycles, Flannels, Game, Gieves & Hawkes and Jack Wills
Ashley continues to hold a majority stake in Frasers, although he stepped aside two years ago to give control to his son-in-law Michael Murray, who now runs the group as CEO.
Earlier this month, Frasers had attempted to buy the luxury handbag maker Mulberry, but the company’s management rejected the price offered because it “does not recognize the company’s substantial future potential value.” Frasers, which already owns a 37% stake in the Mulberry, had offered £83 million for the shares it doesn’t already own.