Shares of British retailer ASOS PLC (GB:ASC) soared over 20% as of writing after the company announced a stake sale in its Topshop and Topman brands along with its FY24 trading update. For FY24, ASOS expects adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) at the upper end of consensus estimates, with sales slightly below guidance.
Additionally, the company announced a refinancing deal for some of its debt by issuing £250 million in convertible bonds (due 2028) and partially repurchasing its existing £500 million bonds (due 2026).
ASOS is a British online retail brand known for its diverse selection of clothing, footwear, and cosmetics.
ASOS Divests Majority Stake in Topshop and Topman
ASOS signed a joint venture deal with Denmark-based Heartland to sell its majority stake in Topshop and Topman. According to the terms of this deal, the joint venture will provide ASOS with certain design and distribution rights for the Topshop and Topman brands in exchange for a royalty fee, allowing the company to continue selling these brands online.
The transaction is expected to be completed in the fourth quarter of 2024. Upon completion, Heartland will hold a 75% stake in the joint venture, valued at £135 million, while ASOS will retain the remaining 25%. Additionally, ASOS will have the option to sell an additional 5% stake in the joint venture to a Heartland shareholder for £9 million.
The deal is expected to improve ASOS’ capital allocation. The company projects that the deal will have a £10-20 million negative impact on FY25 EBITDA. However, it is expected to boost EBITDA over time.
Is ASOS Stock a Buy?
Following the update, ASC stock has received mixed ratings from analysts, including three Holds, one Buy, and one Sell recommendation.
Prior to the update, ASC stock had a Hold consensus rating. The ASOS share price target is 378.33p, which is 14.2% below the current trading levels.
