Revolution Beauty slams shareholder Boohoo’s “self-serving” and “value-destructive” restructuring proposals

(Image credit: Revolution Beauty)

22 Jun 2023 --- Revolution Beauty Group is making moves to dodge a significant restructuring play after its largest shareholder, Manchester-based Boohoo, issued demands to install its own leadership inside the Kent-headquartered British makeup firm.

The boardroom shakeup was put forward in light of a series of historic management issues at Revolution Beauty, including an audit revealing inflated profits, which followed in light of the company’s failure to publish its FY22 accounts, due in February last year.

The Revolution Beauty board has called out “hostile shareholder actions” being tabled by Boohoo in a “reckless” and “cynical attempt without financial outlay nor any compensation to Revolution Beauty shareholders.”

It now proposes to postpone its upcoming annual general meeting on June 27 to some time in late July or early August.

Personal Care Insights has reached out to both parties for further comment.

The boardroom shakeup was put forward in light of a series of historic management issues at Revolution Beauty, including an audit revealing inflated profits (Image credit: Revolution Beauty).Mediating historic management issues
In the aftermath of the Revolution Beauty Group’s IPO in June 2021, the company acknowledges it has faced a “series of material and well-publicized issues” that led to an independent investigation into former directors and managers.

Revolution Beauty floated the possibility of legal action against Adam Minto, the group’s founder and former CEO, as it recovers from an accounting oversight that took place under his leadership.

In January this year, an audit into the company’s dealings under Minto was led by BDO. This was prompted when the brand delayed publishing its FY22 accounts, which was due in February of last year.

BDO’s audit disclosed that Adam Minto and Tom Allsworth had made personal loans of around £1 million (US$1.3 million) to unnamed distributors. It also flags that sales were made to Revolution Beauty’s three key distributors in February 2022, the final month of its full-year accounting period for 2022.

Revolution Beauty is now looking to recover funds relating to the “exceptional costs” it incurred as a result of the situation, and has sent a letter of claim to Minto.

Suspended share trades
Minto quit the company in November shortly after the investigation into the firm’s finances.

When the audited accounts were finally published last month after lengthy delay, it revealed the company overstated profits by £23 million (US$28.3 million).

Revolution Beauty has given its former CEO a deadline of July 7 to respond to its letter of claim.

Trading in the make-up company’s shares have been suspended since September.

Boohoo alleges that Minto “breached his fiduciary, statutory, contractual and/or tortious duties to the company,” which it argues is a major contributing factor to the delay in the audit of the group’s FY22 results, and to the suspension of the company’s shares from trading.

Boardroom shakeup
In a release sent to the London Stock Exchange, Revolution Beauty remarks: “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.”

Trading in Revolution Beauty’s shares have been suspended since September (Image credit: Revolution Beauty).However, it is these managers who are in the direct line of fire. Boohoo has been calling for a general meeting where it plans to propose dismissing Bob Holt, Elizabeth Lake and Derek Zissman as Revolution Beauty’s directors, and appointing Boohoo non-executive directors Alistair McGeorge and Neil Catto.

In a follow-up statement to the London Stock Exchange issued today, Boohoo announced that Rachel Horsefield, former CEO of THG beauty, will be included in the future independent board appointment process.

Revolution Beauty responded directly to Boohoo’s demands, decrying them as “value-destructive, opportunistic and self-serving,” while arguing that the motives were not in alignment with the company’s shareholders “as a whole.”

“Boohoo continues to strongly believe that a senior leadership team with the right retail, e-commerce and consumer brands experience is required to deliver value for all shareholders and take Revolution Beauty into its next phase, which must focus on growth,” maintains Boohoo.

Boohoo currently holds around 26.6% of voting rights in Revolution Beauty and was declared its most significant shareholder last November.

Revolution Beauty Group states it is now “ensuring value creation at this critical time for the company, which is on the cusp of having trading in its shares on AIM restored.”

By Benjamin Ferrer

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