LONDON — British e-tailer Asos Thursday said it has entered a joint venture with Heartland, the investment and holding company representing the interests of Bestseller owner Holch Povlsen and his family, which will purchase a 75 percent stake in the Topshop and Topman brands.

The deal is set to raise 135 million pounds, or $178 million, to help Asos repay debts amid refinancing. Asos will have the rights to sell a further 5 percent share for 9 million pounds. Nordstrom, which acquired a minority interest in the Topshop and Topman brands in 2021, will continue to hold a minority interest in Asos.

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As part of the deal, Asos will have certain design and distribution rights for the Topshop and Topman brands in return for a royalty fee to enable it to continue marketing and selling the brands online.

Asos added the deal will help accelerate its core Back to Fashion strategy, which was unveiled in November 2023, and fund the relaunch of the Topshop website within the next six months.

José Antonio Ramos Calamonte, chief executive officer at Asos, said: “Topshop and Topman have made good progress since we acquired the brands in 2021. The new joint venture with Heartland is a testament to the brands’ potential and the partnership will help bring Topshop and Topman to more customers globally.”

Lise Kaae, CEO of Heartland, said the deal can bring “the best of the Topshop and Topman brands to customers globally while supporting Asos’ strategy to obtain a more efficient capital allocation.”

For fiscal 2025, Asos said the transaction is expected to have a 10 million to 20 million pound negative impact on earnings before interest, taxes, depreciation and amortization, but the situation will improve over time.

The company expects its adjusted EBITDA for fiscal 2024 to stand at the top end of consensus estimates with sales slightly below guidance. Results for the fourth quarter will be released on Oct. 15.

Jelena Sokolova, senior equity analyst at Morningstar, said the sale indicates “a capital-destructive move, raising questions about the quality of previous capital allocations. However, the sale can be seen as a strategic step to enhance balance sheet quality.”

Sokolova added with net debt at 348.8 million pounds as of March 2024, this move should improve Asos’ financial standing, providing 118 million pounds in cash and reducing borrowings by 13 million pounds.

“This positions Asos to better weather the challenges posed by a post-COVID-19 downturn in the online apparel industry and intensifying competition from Shein and Temu. Additionally, Asos is refinancing its Great Britain Pound convertible bonds due in 2026 by issuing bonds due in 2028, reflecting the higher interest rate environment and Asos’ current challenges compared to 2021,” she said.

Asos acquired Topshop, Topman, Miss Selfridge and HIIT from the now-collapsed Arcadia in 2021 and revealed new identities for Topshop and Topman in September 2022.

Pippa Stephens, senior apparel analyst at GlobalData, said, “Topshop and Topman were two of the most popular brands in the U.K. from the ‘90s up until the late 2010s; however, their desirability waned significantly in the last few years with Arcadia, and this has fallen even further under Asos’ ownership, so Heartland has a challenge ahead in bringing them back to life. Heartland also owns the Bestseller group, which holds brands such as Vero Moda and Jack & Jones, and has been experiencing consistent growth. Therefore, its fashion expertise makes it well placed to turn Topshop and Topman around, with more exciting designs and improved quality needed.”

On a more positive note, Asos on Thursday also said it has partnered with H&M Group to become the exclusive retailer for denim brand Cheap Monday’s comeback, which was revealed with a campaign featuring brand ambassador, the American singer Nessa Barrett. Asos already works with the H&M subsidiaries &Other Stories, Monki and Weekday.

Founded in 2004, Cheap Monday was put on hold in 2018 due to challenges from the rise of digital commerce. Via the partnership with Asos, Cheap Monday now will be available in key markets with menswear and womenswear ranges featuring an assortment of denim.

A limited capsule of jersey tops, highlighting Barrett’s diverse personas and Cheap Monday’s range, will be available on Asos later this month.

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