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Next to Acquire 25% Stake in Fashion Rival

British fashion retailer Next plc is set to take a 25 percent stake in retail rival Reiss Ltd. for an undisclosed amount.

Next will acquire shares from existing shareholders, it said on Monday. Reiss and its digital presence have performed well throughout the coronavirus pandemic, and sources said private equity firm Warburg Pincus has been contemplating how to monetize a portion of its investment to capture some of the recent upside. Reports value the deal in the 200 million pound range ($277.6 million). Warburg holds a majority stake, which it acquired in May 2016, while the founding Reiss family retained a minority stake.

Next said that upon completion of the transaction, which is still subject to regulatory approval, it will make an equity investment of 33 million pounds ($45.8 million) and a debt investment of 10 million pounds ($13.9 million) into Reiss. Under the terms of the deal, Next has the option through July 2022 to acquire an additional 26 percent interest in Reiss at pre-agreed terms. If that option is exercised, Next will hold a majority interest in the chain at 51 percent.

“We are excited to see what can be achieved through the combination of Reiss’s exceptional product, marketing and brand building skills with Next’s Total Platform infrastructure,” said Next CEO Simon Wolfson, describing the label as an “outstanding brand with enormous potential and a first class management team.”

Reiss’ digital business will operate on the Total Platform, which will also provide warehousing and distribution services for the retail, wholesale and concession, effective in February 2022.

Reiss will continue to operate its business as a standalone company, retaining management autonomy and creative independence. Christos Angelides, who was named CEO of Reiss in 2017, will continue in that role. Angelides previously had worked at Next for 28 years. He left to join Abercrombie & Fitch Co. as brand president for the Abercrombie business for about 14 months before rejoining Next, this time as CEO, succeeding founder David Reiss. Reiss will have its own independent board of directors and will continue to be based in London.

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“I believe the partnership with Next will be transformational for Reiss’s operational effectiveness. Next’s infrastructure will ensure Reiss is not only more efficient as a business but more effective at serving its customers directly through Reiss stores, at reiss.com and through its worldwide partners,” Angelides said. “Whilst we will continue to focus on creating authentic and timeless collections, today’s announcement provides a great opportunity for Reiss to realize the brand’s global potential as a modern fashion house.”

Since its founding in 1971 as a menswear brand, Reiss has since branched out to include women’s apparel and accessories and is positioned as an affordable luxury apparel firm selling classic and modern fashion offerings.

For the year ended Feb. 1, 2020, Reiss posted sales of 227.4 million pounds ($316 million), up 22 percent from the prior year. Reiss operates 79 stores, 104 concessions and wholesale sales and franchises across 14 countries.

“In its first year, after accounting for integration and acquisition costs, the investment is expected to have minimal impact on Next group profits but we expect a positive contribution thereafter,” Next said.

Next, based in Leicester, claims it’s the U.K.’s No. 1 online apparel retailer. It has 500 stores in the U.K. and Ireland, as well as an online presence in over 70 countries. It sells its own Next brand and over 700 other fashion, home and beauty brands, including Reiss. In September, Next acquired a majority stake in Victoria’s Secret’s U.K. business in a newly formed joint venture with L Brands after the lingerie companies collapsed in to administration.