Behind the rift: Revolution Beauty vs Boohoo Group

In what seems to have been a tug-of-war that has escalated rapidly, Revolution Beauty and Boohoo Group have been going head-to-head over who is to take control of the British beauty firm after a series of malpractices were found during an independent investigation. The tension between the two has become increasingly public, taking over headlines in recent weeks as the industry deciphers what is to come next.

FashionUnited has outlined the recent events that have unfolded.

Background

Boohoo Group first registered its interest in Revolution Beauty back in mid-2022, when it began upping its stake in the beauty label, eventually increasing its holding to over 26 percent, ultimately making it Revolution’s largest shareholder.

It came at a time when it was revealed that Revolution was facing the threat of an independent review after its auditors had failed to complete its annual FY22 results on time.

Ultimately, investigators were called in after auditors BDO LLP raised “serious concerns” surrounding the audit, resulting in the suspension of its shares on AIM.

It was later revealed that Revolution Beauty’s accounts had inflated sales by nine million pounds in order to meet annual targets, with co-founders Adam Minto and Tom Allsworth – both of whom stepped down during the investigation – found to be behind a series of personal loans to distributors and employees.

Following their departure from the company, Bob Holt was appointed CEO after taking on the position in an interim capacity.

Once the FY22 audit was finally complete, Revolution ended up reporting narrowing losses of 13.3 million pounds in the six months to the end of August 2022, however revenues took a 4.2 percent hit to 75.3 million pounds.

The rift commences

Signs of Boohoo’s upset in the dealings became evident when the group stated that it would be voting against Revolution’s reappointment of board directors Holt, Derek Zissman and Elizabeth Lake at its AGM on June 27.

The fast fashion giant said it would propose the appointments of Alistair McGeorge and Neil Catto to the board to help Revolution “switch to growth” as it transitions into the next phase.

It also requested that the brand not proceed to appoint Rachel Maguire and Matthew Eatough as directors.

A few days later, Boohoo issued a further statement adding that it wanted to appoint a former THG exec to the board.

Following the publishing of its Q1 results, Revolution Beauty addressed Boohoo’s requests, brandishing the attempt to takeover the company as “value-destructive, opportunistic and self-serving”.

At the AGM, Revolution’s CEO, CFO and chairman, as well as Maguire and Eatough, were reappointed despite Boohoo’s efforts to oust them, Boohoo deemed the actions as “self-serving” and suggested that such a move could see share awards for the “self-elected board”.

Boohoo noted that “at no point did the remuneration committee seek prior shareholder consultation” and once again called on the board to convene the “requisitioned general meeting”.

Tensions heighten

On June 29, Boohoo then demanded an answer to why Revolution provided two million pounds of its shares to a group of senior executives, which included Holt and Lake, with the group further requesting the terms of the move to be issued immediately.

It additionally asked Revolution to publicly confirm that the proposed terms of grant of the free share awards were not amended following its announcement to vote against the CEO and CFO appointments, something that Revolution was later able to confirm.

The company stated that the awards had an aggregate value of around two million pounds across 17 individuals and were made to reflect the “hard work and commitment needed over the past 12 months”. According to the firm, employees agreed to take their bonuses in share options over cash to support growth activities.

Revolution continued: "These amounts pale in comparison to the extremely management-friendly incentive packages Boohoo have awarded in the past, including most recently awarding the executive team significant cash bonuses even after missing certain financial targets.”

In the statement, Revolution referenced Boohoo’s highly controversial 150 million pound management plan in 2020 and its 175 million pound scheme in early 2023 to replace the prior plan, which were notably voted against by 37 percent of Boohoo shareholders.

The plan would see bonuses handed out over a period of time if Boohoo reaches five billion pounds in capitalisation.