Majestic Wine: glass half full

"Wine retailer struggling to grow seeks boss; must have alternative ideas; can bring own business." Majestic Wine, the UK-listed wine retailer, parted with its chief executive in February. On Friday it got a new boss, Rowan Gormley, by acquiring his business, Naked Wines, for £70m in cash and shares. So keen was Majestic that it made Mr Gormley chief of the combined business.

The deal is not just expensive headhunting. The acquisition will expand Majestic's £280m turnover by 26 per cent. Internet sales would more than double. This is important: about 7 per cent of UK alcohol (by volume) is sold on the internet, the third highest percentage worldwide. Naked also provides an entree to the US and Australia - roughly 40 per cent of its sales - Majestic lacked international trade.

Naked buys wine directly from independent winemakers, rather than using middlemen. It also offers customers ("angels") the chance to invest in these wineries. In return for the crowdfunding, customers receive discounted wine. They seem to love this feature, even if the company is bare of profits.

While Mr Gormley has agreed to accept shares as payment, Majestic had to buy out Naked's main owner, Wein of Germany, with £50m of cash up-front, funded by debt. Assuming Majestic remains cash-generative, its decision to suspend the dividend should enable quick repayment.

If Majestic can remain financially liquid, this takeover should drink well in the years ahead.

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