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SoftBank’s interest in The Hut Group shows the value of a golden share

 (Handout)
(Handout)

When The Hut Group floated on the stock market last year, most of the buzz was around the blockbuster global sales of its online cosmetics and nutrition brands like ESPA and Myprotein.

Deep under the bonnet, though, a more exciting business lurked.

While building up its own ecommerce brands over the years, THG had developed an efficient software system to run its warehousing and other operations. Fairly recently, it started selling that service under the name of Ingenuity to other companies looking to sell online.

In a deal completed this morning, that nascent business, called Ingenuity, has been valued at the same price as the entire company at the time of the IPO.

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Akshay Naheta, investment guru at the world’s biggest tech investor, SoftBank, has decided his Japanese giant needs a slice of THG’s business-to-business action and has bought an option to buy a stake of Ingenuity in a deal valuing it at a monster $6.3 billion.

SoftBank’s aggressive, big bets don’t always go right; just look at WeWork.

But this is a deal based on more than just gut instinct.

For starters, Naheta has struck just as THG’s post-IPO share price rally ran out of steam, so he gets in at a good price.

But, more importantly, he wins a partner who can boost many other companies in the SoftBank portfolio.

SoftBank’s Yahoo Japan operation is a good example.

Currently, Amazon is giving it a kicking, partly because Yahoo Japan operates on the eBay model where merchants use third parties to do the deliveries, stripping out a chunk of Yahoo Japan’s potential profit.

But by teaming up with THG and the warehouse robotics group Autostore (another SoftBank firm), Yahoo Japan could provide its sellers the full service Amazon does, from managing the purchase to delivering the goods.

Hey presto, Yahoo Japan gets next day delivery to match Jeff Bezos and captures more of the revenue.

But here’s the thing: if he could have, Naheta would probably have bought the whole of Ingenuity if he could - or at least a controlling stake.

But that could have hampered THG founder Matt Moulding’s ability to do other deals, and keep using the Ingenuity business to boost his own in-house beauty and nutrition brands with its technology.

Moulding is able to put paid to such unwanted approaches arguably because he has a controversial “golden share” in the company blocking takeovers for three years.

I say “arguably” because his shareholders seem supportive of him thus far. They may have allowed him to have his way and sell only a minority stake even if he had no golden share.

But, then again, they may have preferred to grab SoftBank’s cash now and pocket a fast buck.

The golden share caused much angst among City investors ahead of the IPO, and continues to do so now.

It has meant THG can’t be included in the FTSE 100 and so misses out on inclusion in many people’s tracker funds.

On a day like today, though, when giant investors could snap at his heels to break up the business in a way that could damage the whole, you can see where he was coming from.

The government is looking to change the City’s rules so founders like Moulding aren’t punished for wanting share structures allowing them to shape their businesses in their formative years on the public markets.

It is right to do so.

In a few years, we will look back on the THG flotation ruckus and wonder what the fuss was all about.

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