UPDATE 1-Britain's Next snaps up 25% stake in upmarket rival Reiss

* Next pays 33 mln pounds for initial holding

* Has option for further 26%

* Reiss will utilise Next’s online infrastructure (Adds detail)

LONDON, March 10 (Reuters) - British clothing retailer Next has agreed to buy a 25% stake in upmarket smaller rival Reiss and has an option to secure majority control, it said on Wednesday.

The UK clothing sector has been hammered by COVID-19 lockdowns. With stores shuttered, retailers have had to rely on their online channels.

Next has been a resilient performer during the pandemic thanks to its huge online business and last year CEO Simon Wolfson said the crisis would throw up acquisition opportunities.

Last May, Next expanded its beauty business by taking on five former Debenhams beauty departments, while in September it established a joint venture with Lbrands to sell Victoria’s Secret and Pink products. In January, Wolfson tried and failed to buy the stricken Topshop brand which eventually went to ASOS .

Next will pay 33 million pounds ($46 million) for the Reiss stake and also make a debt investment of 10 million pounds, financed from cash resources.

It has an option to acquire an additional 26% equity interest at pre-agreed terms by July 2022.

Reiss is majority owned by U.S. private equity firm Warburg Pincus, with the founding Reiss family retaining a minority holding.

It’s CEO is Christos Angelides who previously worked for Next for 28 years.

Reiss operates in 14 countries from 79 stores, 104 concessions and via wholesale and franchises. It reported turnover up 22% to 227.4 million pounds in the year to Feb. 1 2020.

Next said Reiss will retain its management autonomy and creative independence.

The deal will see Reiss’s online operations, both in the UK and overseas, contracted to Next through Next’s Total Platform business.

Total Platform will also provide warehousing and distribution services for Reiss’s retail, franchise, wholesale and concession businesses.

“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 Wolfson.

Shares in Next, up 41% over the last year, were down 0.4% at 1215 GMT.

$1 = 0.7200 pounds Reporting by James Davey; Editing by Kate Holton and Emelia Sithole-Matarise