Hostile Shareholder Actions and AGM

Revolution Beauty Group PLC

21 June 2023

 

For immediate release

21 June 2023

REVOLUTION BEAUTY GROUP PLC

("Revolution Beauty", the "Group" or the "Company")

Hostile Shareholder Actions and AGM

Revolution Beauty Group plc (AIM: REVB), the multi-channel mass beauty innovator, today announces the Company's response to the letter and accompanying notice dated 19 June 2023 received from boohoo Group plc ("boohoo"), seeking, as a holder of approximately 26.6% of the voting rights of the Company, to requisition a general meeting of the Company under section 303 of the Companies Act 2006 (the "Requisition").

The board of Revolution Beauty is focussed on ensuring value creation at this critical time for the Company, which is on the cusp of having trading in its shares on AIM restored.  The board believes that boohoo's hostile Requisition is value-destructive, opportunistic and self-serving, as well as not being in the interests of the Company's shareholders as a whole. 

The board of Revolution Beauty draws shareholders' attention to the following matters: 

·        The Group is, as stated in the announcement of 2 June 2023, trading well and expects to deliver high single digit growth in revenue, and constant currency adjusted EBITDA in the high single digit millions for the financial year to 28 February 2024

·        The current directors and management team have navigated Revolution Beauty out of the chaos arising from the extensive historical management and governance issues within the business 

·        boohoo's actions appear to be a cynical attempt to seize control of the Company without financial outlay nor any compensation to Revolution Beauty shareholders, and would appear to be a reckless strategy unless boohoo were confident of 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 destablise rather than support the business 

The Requisition

The boohoo Requisition proposes to remove Robert Holt, Derek Zissman and Elizabeth Lake as directors of Revolution Beauty, and to replace them by appointing as directors the current deputy chairman of boohoo (Alistair McGeorge) and a previous executive director of boohoo (Neil Catto).

The proposed boohoo candidates would, if the Requisition were successful, comprise a majority of the Revolution Beauty board, alongside current director Jeremy Schwartz.  The Requisition also states that boohoo intends to vote its shares against the proposed re-appointment of Robert Holt, Derek Zissman and Elizabeth Lake at the Company's upcoming annual general meeting ("AGM") and that boohoo opposes the proposed appointment of independent non-executive directors Rachel Maguire and Matthew Eatough to the board.

Proposed postponement of AGM

The Company's AGM is currently scheduled to take place at the offices of Macfarlanes LLP at 20 Cursitor Street, London EC4A 1LT on Tuesday 27 June 2023 at 1:30 p.m.

However, the Company's current directors consider that shareholders must be given sufficient time to consider whether they believe that boohoo's proposed seizure of majority control of the Company's board by voting its 26.6% stake to replace all but one of the current directors with the proposed boohoo candidates is a viable strategy that shareholders other than boohoo wish to support, particularly in respect of a business whose fortunes have only just begun to improve under a new board and management team.

Given that many of the Company's retail shareholders are required under their custodian or nominee arrangements to have submitted proxies on or prior to today's date, and given that the overall proxy deadline for the AGM is currently 1.30 p.m. on Friday 23 June 2023, clearly this shareholder engagement would not be possible without a delay to the AGM.

Accordingly, the Company will propose at the originally-scheduled AGM on Tuesday 27 June 2023 to postpone the AGM to a new date, which the Company will announce in due course, but which is expected to be in late July or early August 2023.  The resolutions proposed by boohoo in the Requisition would then also be put to shareholders at a separate general meeting on the same date as the adjourned AGM.

Historical management issues

In the aftermath of the Company's IPO in June 2021, the Group faced a series of material and well-publicised issues, as summarised in prior announcements and in the Company's annual report and accounts for the financial year ended 28 February 2022 (the "FY22 Accounts").

These historical issues culminated in an independent investigation into the actions of certain former directors and members of management and, as announced yesterday, in possible litigation against Adam Minto, the Company's founder and former CEO, who retains a stake of approximately 15.8% in the Company.  These issues also resulted in trading in the Company's shares being suspended on 1 September 2022.

Revolution Beauty's recent turnaround

Revolution Beauty's current directors and management team, supported by our exceptional group of staff, have worked tirelessly for the last 10 months towards resolving the historical issues which have resulted in many detrimental outcomes for the Company's shareholders and other stakeholders.

Significant board and senior management changes were implemented in the wake of the investigation, and the current directors and management team finally succeeded in completing the audit of FY22 Accounts as announced earlier this month.  This was a significant step towards the re-admission of the Company's shares to trading on AIM, and one that was achieved notwithstanding the historical issues uncovered during the investigation.

The current directors are also confident that, in isolation from any adverse effects resulting from boohoo's recent disruptive actions, the suspension of trading in the Company's shares could potentially be lifted in a matter of days.

The Group's lenders have been incredibly supportive of the current directors and management team throughout their tenure.  The current directors believe that boohoo's proposed actions may only serve to jeopardise the good working relationship between the Group and its lenders, which may be to the detriment of the Company and independent shareholders.

The current directors firmly believe that they, alongside Revolution Beauty's other senior management, are the right team to continue to lead the Company.  Having been faced with a business in turmoil as a result of the historical management issues, it is only recently that the Company's business, corporate governance and wider practices have been brought into line with the standards required of a publicly traded company.

A hostile shareholder

The approach taken by boohoo towards Revolution Beauty is nothing short of value-destructive, opportunistic and self-serving.  At a time when, thanks to current management's tireless efforts, the Company's fortunes are finally looking up, with business back on track and re-admission to trading on AIM being potentially imminent, boohoo is seeking to stage a board and management control coup without making a general offer, or paying a single penny, to independent shareholders of the Company, and with no reasonable justification for its wholesale and dramatic proposed changes to the executive management team.

On 28 November 2022, when it acquired its latest stake in the Company, boohoo publicly announced that it intended to be "a supportive stakeholder and long-term partner", thereby justifying holding a 26.6% stake but not wishing to make a bid for the whole Company.  In conversations with the Company's management since that announcement, boohoo's representatives repeatedly reiterated that approach, emphasising its support for the strategy of value-creation for shareholders that the Company's management team have been so focussed on since they joined the business.  Peremptorily seeking to remove the majority of the current directors and executive management, with no consultation or prior warning to the board, and replacing them with directors from boohoo's own very different business, however, paints a very different picture.  These are certainly not the actions of any reasonable "strategic" shareholder.

The current directors also believe that a relevant factor for the independent shareholders of the Company in considering the current situation is whether any of boohoo's board members, their associates, or any other persons connected with boohoo, owns shares in the Company and whether, in fact, the total shareholding of boohoo and its associated or otherwise connected persons is truly limited to 26.6%.

The directors would consider it to be surprising if boohoo, with a shareholding of just 26.6% (assuming that is correct), would launch such an aggressive public campaign without the support of, or having first consulted with, other major shareholders of the Company. The board would therefore question whether, if other shareholders were in fact in discussions with boohoo to take control of the Company's board (as boohoo is attempting to do), the potential legal and regulatory consequences of any such possible alliances or discussions have been properly considered.

Timing and objectives of the hostile shareholder

The timing of the Requisition, being a mere three days before boohoo's own annual general meeting on Thursday, 22 June 2023 (tomorrow), amid reports of widespread shareholder opposition resulting from boohoo's persistent management and corporate governance failures over a prolonged period, is also perhaps no coincidence.

The current Revolution Beauty directors believe that boohoo's proposed seizure of majority control of the Company's board could simply be part of an attempt by boohoo to distract its own shareholders from the various issues that boohoo itself is facing, including its own recent share price devaluation (in the past three years, boohoo's market capitalisation has fallen by over £4 billion and its shares currently trade close to an all-time low), the reported opposition from key shareholder advisory groups both in relation to the re-election of Carol Kane (boohoo's co-founder) at the upcoming boohoo annual general meeting, and also boohoo's remuneration report.

The current Revolution Beauty directors are also concerned that, in light of the historical challenges that the Group has faced (and in spite of the forbearance of the Group's lenders due to the excellent working relationship with the current management team), the Requisition appears to be a tactic to de-stabilise the Group and its business in order to then force the Group into administration for the purposes of acquiring it at the lowest possible price.  Shareholders will be aware of boohoo's track record of cheaply acquiring businesses that were in financial distress (which Revolution Beauty is not), as it did with Karren Millen, Coast and Nasty Gal (amongst others).  If this were to be the fate of the Company as well, shareholders would likely receive little or no value for their shares.

The track record of the hostile shareholder's business model and directors

boohoo has historically operated a pure-play online business model and it appears that the actions proposed would result in a significant shift into bricks and mortar and a sudden change in strategy.

Despite boohoo's assertion that the Company's board (if controlled by boohoo) should have a "senior leadership team with the right retail, e-commerce and consumer brands experience", unlike the Company's current management team, the proposed boohoo director candidates do not appear to have any relevant experience in running a business in the beauty sector, nor  in supplying a store estate and product range which is focussed on the high street. A growing proportion of the Group's business (approximately 70%) is with global high street retailers.

On the other hand, the current Revolution Beauty management team have a strong working relationship with the Group's key retailers and other stakeholders globally. The current directors also have extensive experience in retail, e-commerce and fast-moving consumer goods growth businesses.

The current Revolution Beauty directors believe that they are much better placed than the proposed boohoo candidates to deliver shareholder value.  Removing the current directors and replacing them with the proposed boohoo candidates would be a high-risk strategy, which is the opposite of the period of management stability that is so fundamental to the future of the Company.  The approach advocated by boohoo would hand the reins of the Company to a set of boohoo directors who are used to a fundamentally different business model than that of Revolution Beauty.  The board would, however, welcome the appointment of an e-commerce candidate, for their expertise to further develop the Company's e-commerce strategy.

Risk to re-listing process and to audit for FY23

As noted above, Revolution Beauty's current directors have, with the support of the Group's lenders and advisers, made good progress in working towards lifting the suspension in the trading of the Company's shares.

Similarly, the audit of the Group's financial statements for the financial year ended 28 February 2023 is well underway and the Current Directors have been working closely with the Group's auditors in finalising this process.

Against that backdrop, the fundamental changes to the Company's board proposed by boohoo risk de-railing both of these well-advanced processes, which would be to the significant detriment of shareholders as a whole, and appears to be a strategy to destroy value.

The Company will continue to work towards lifting the suspension of the Company's shares from trading on AIM and will keep shareholders updated on this progress. The Company will also make shareholders aware of any further implications of boohoo's actions that may impact this process or the ability of the Company's shares to trade on AIM.

Current directors continue to be open to dialogue

Despite the unwelcome and opportunistic attack on the Company from boohoo, Revolution Beauty's current directors continue to be prepared to engage with boohoo in good faith and in a constructive manner, to avoid the destruction of value for all shareholders.  The current directors urge boohoo to make use of this offer.

In the absence of any meaningful engagement, the Company will consider all other avenues open to it, in particular taking actions better to understand the level of boohoo's shareholding in the Company and the shareholdings of any possible associates of boohoo.

Pending the AGM (which, as above, is expected to be postponed) and the requisitioned general meeting, current management will continue to focus on the task at hand, namely re-building the Group for the benefit of shareholders as a whole, returning it to profitability and ensuring that the Company's share are re-admitted to trading as soon as possible.

The Company will make further announcements in due course.

In the meantime, shareholders are encouraged to support the current directors and the Company, but to take no other action.

Derek Zissman, Chair of Revolution Beauty, said:

"Over the last 12 months, we have acted decisively to protect the value of Revolution Beauty for the benefit of all our stakeholders. This has included an almost total change in the composition of the Board, including the appointment of Bob and Elizabeth as the new CEO and CFO, respectively. They have worked tirelessly to put Revolution Beauty on a more stable footing and ensure it is well-placed for future growth.

"That is a process that is ongoing, and boohoo's actions are a clear attempt to destabilise the business at a crucial juncture in its recovery. This will only serve to delay further the lifting of the suspension of trading in Revolution Beauty's shares. I urge shareholders to vote in favour of reappointing the current directors of the Board and allow the management team to finish the job in hand."

Bob Holt, CEO of Revolution Beauty, said:

"We have a clear strategy, ongoing momentum and a highly relevant and attractive customer offer, demonstrated by the encouraging recent trading performance of the business. While we operate an omni-channel approach, our future growth is first and foremost via a global retailer strategy. This is clearly at odds with boohoo's entirely online model.

"Since joining Revolution Beauty as CEO, I have worked closely with our CFO Elizabeth Lake to strengthen the Company's internal controls and ensure we are acting in the interests of all our shareholders. This is an inherently strong business which, due to previous management, is now significantly undervalued and whose shares remain suspended from trading. It is evident that boohoo is seeking opportunistically to take advantage of this situation.

"Together with the rest of the Board, I remain highly confident in the future growth prospects of the Company, and we are focused on ensuring that Revolution Beauty is in the best position possible to deliver within a large and attractive market."      

For further information please contact:

Revolution Beauty Investor Relations Bob Holt / Elizabeth Lake	[e-mail]
Joint Corporate Brokers Zeus (NOMAD): Nick Cowles /Jamie Peel /Jordan Warburton Liberum: Clayton Bush / Edward Thomas / Miquela Bezuidenhoudt	Tel: [phone] Tel: [phone]
Media enquiries: Headland Consultancy Matt Denham / Will Smith / Antonia Pollock	Tel: [phone] [e-mail]

 

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