Mulberry, the underperforming luxury brand in the UK, has declined a takeover offer from Mike Ashley’s Frasers Group.
Frasers, predominantly controlled by the tycoon renowned for its Sports Direct brand, presented an offer on Monday that appraised Mulberry at £83 million.
The organisation holds a 37% stake in Mulberry, making it the second largest shareholder in the company.
It asserted that it was taking measures to avert a repeat of the “Debenhams situation” after seemingly being uninformed about Mulberry’s decision to raise capital last Friday.
Mulberry, primarily recognised for its handbags, has been experiencing diminished demand in the context of a global luxury downturn and disclosed last week a significant decline into negative financial performance during its most recent fiscal year due to these challenges.
The annual accounts included a caution indicating that the downturn had led to a “material uncertainty which may cast significant doubt on the group and parent company’s ability to continue as a going concern” should it persist.
Mulberry claimed in a statement on Tuesday that Fraser’s proposal, which Mr. Ashley’s son-in-law Michael Murray has been in charge of since 2022, failed to recognize the company’s significant potential future value.
The bid, it also said, did not have the support of its majority shareholder.
Mulberry claimed that it had discussed the strategy with Challice, a company based in Singapore and run by billionaire Ong Beng Seng and his wife Christina.
The firm put faith in its recently appointed chief executive, Andrea Baldo, to drive a turnaround and said it would stick with the plans for a capital raise.
This establishes a robust foundation for the company to implement a turnaround strategy and, ultimately, to maximise value for all Mulberry shareholders.
Frasers’ methodology, assigning a value of 130p per share, estimates the worth of its non-owned stake in the company at £52.4m.
According to UK takeover regulations, the deadline for making a definitive offer for Mulberry or withdrawing is set for 28 October.
On Tuesday morning, Mulberry shares experienced a decline of 3% in trading activity.
Dan Coatsworth, an investment analyst at AJ Bell, commented on the situation: “Ashley’s frustration is likely heightened by being excluded from Mulberry’s fundraising strategy announced last Friday, especially considering that Frasers holds a 37% stake in the company.”
Ashley may have stepped back from running Frasers, but as the majority owner of the retail conglomerate, it is evident that he remains actively involved in the operations behind the scenes. The acquisition of the stake in Mulberry occurred during his tenure at Frasers, suggesting that he may perceive the snub on a personal level.
“Mulberry’s fundraising appears to be perilously approaching a situation where it may require a cash infusion merely to maintain operational continuity.” Frasers has now entered the fray with a potential takeover proposal, and, and while the offer may not be particularly substantial, the circumstances do not warrant a more favourable valuation.