Majestic Wine has spent up to £70m to acquire online rival Naked Wines, installing the company’s founder, Rowan Gormley, as its new CEO.

Gormley, also founder of Virgin Wines and Virgin Money, said the enlarged Majestic Wine business was an opportunity ‘to build a wine retailer that can thrive in a market of commoditised, discounted and boring wines, by giving customers the inspiration they are looking for – and supermarkets can’t provide’.

Majestic and Naked will continue to operate as independent brands. Majestic chairman Phil Wrigley called the deal ‘transformational’ and added, ‘The two businesses have significant strengths which are very complementary.

‘Majestic’s distribution skills, a nationwide UK store network and customer service-orientated knowledgeable staff, are a perfect fit with Naked Wines’ unique sourcing and selling model.’

Naked Wines’ international business – it operates in the UK, US and Australia – is customer-funded, with subscribers known as ‘angels’ funding dozens of independent winemakers in return for preferential pricing.

The company has indicated that the two businesses’ buying teams will remain independent, but added, ‘Naked Wines will no doubt tap into Majestic’s expertise to help us crack regions we’re unfamiliar with, such as Burgundy.’

Majestic has paid £50m on completion of the deal, about £30m of it to repay Naked Wines’ debts, plus up to £20m-worth of Majestic shares contingent on future performance.

Naked Wines reported sales up by 40% to £70m in 2014. It also reported operating losses (EBITDA) of £3.3m for the year, linked to its overseas investments, but said it expects to break even within the next year.

Wrigley said the deal would ‘significantly accelerate’ the development of Majestic online – viewed as a weakness of the business – while giving Naked Wines a physical store network to allow ‘click and collect’ shopping.

Gormley replaces acting Majestic CEO Nigel Alldritt, who returns to the chief financial officer role after stepping in on an interim basis following the departure of Steve Lewis in February.

Cavendish Corporate Finance advised Naked Wines and the company’s former majority shareholder, German wine group WIV Wein International AG, on the deal.

Meanwhile, Majestic warned that its pre-tax profits for the year to 31 March were likely to fall to about £21m due to weak trading in March and unfavourable foreign exchange swings.

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Written by Richard Woodard