There’s nothing beautiful about the spat between online fast fashion retailer Boohoo (BOO:AIM) and make-up supplier Revolution Beauty (REVB:AIM), in fact it has turned downright ugly.

Revolution Beauty’s top shareholder wants the company to call a general meeting to remove directors including chief executive Bob Holt, just a day after his reappointment at a chaotic shareholder meeting, where Boohoo was successful in ousting the senior management, only for the sole remaining director to bring in two non-executive directors who then reappointed the executives - Holt, finance director Elizabeth Lake and chairman Derek Zissman - allowing for the suspension of Revolution Beauty’s shares to be lifted.

WHAT IS SEETHING BOOHOO SAYING?

Halted from trading on the stock market on 1 September last year following an accounting scandal and the failure to report its 2022 annual results, shares in Revolution Beauty rocketed 57% higher to 29.8p today on the lifting of the lengthy suspension.

As for Boohoo, it has built a 26.6% stake in Revolution Beauty as the brand has strengths and spending on cosmetics is often fairly resilient in difficult economic conditions, while Boohoo offers Revolution Beauty a very useful sales channel.

Boohoo wants to remove Holt, Lake and Zissman and appoint former New Look chairman Alistair McGeorge and erstwhile Boohoo finance director Neil Catto as directors ‘without further delay’. It remains supportive of a lifting of the suspension, but ‘not at the expense of doing so with a board that has proven to behave inappropriately’.

The online fashion seller ‘fails to see how such a board can claim to be acting in the best interests of shareholders, and is instead self-serving, as demonstrated by its actions’ which will ‘likely result in significant remuneration and share awards for members of a self-elected board at the lifting of the suspension of trading in its shares.’

WHY REVOLUTION BEAUTY IS STANDING FIRM

As for Revolution Beauty, it described Boohoo’s approach towards the company as ‘nothing short of value-destructive, opportunistic and self-serving. At a time when, thanks to management’s tireless efforts, the company’s fortunes are significantly improved, with business back on track and restoration to trading on AIM, 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.’

THE EXPERT’S VIEW

Russ Mould, investment director at AJ Bell, said: ‘Revolution Beauty’s contention that Boohoo is aiming to take the company over by stealth through a boardroom coup without making an offer for the business may find some sympathy with minority shareholders.

‘On the other hand, Revolution Beauty shares have been suspended for a long period thanks to issues with its accounts, so it is not like management have a lot of credit in the bank.

‘The return from suspension today is welcome news for investors and the shares have surged higher, although, at 29p, it is a long road back to the issue price of 160p from its 2021 IPO.’

Mould added: ‘For the sake of other shareholders, both parties could do with putting the war of words behind them and working together constructively, whatever concessions this might require on both sides.’

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Daniel Coatsworth) own shares in AJ Bell.

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