Mulberry, the beleaguered luxury brand from the UK, has dismissed a takeover proposal put forth by Mike Ashley’s Frasers Group.
Frasers, which is predominantly owned by the magnate known for its Sports Direct label, submitted an offer on Monday that assessed Mulberry’s value at £83 million.
This company stands as the second-largest stakeholder in Mulberry, possessing a 37% equity stake.
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Frasers asserted that it was motivated to intervene to avert “another Debenhams scenario,” especially after feeling sidelined regarding Mulberry’s recent decision to secure additional finances.
Renowned for its handbags, Mulberry has been contending with subdued demand amid a global downturn in the luxury sector, recently revealing a significant loss in its last fiscal year due to these adversities.
The company’s annual report included a caveat indicating that the downturn had resulted in a “material uncertainty which may cast considerable doubt on the group and parent company’s capacity to continue as a going concern” should these challenges persist.
In response on Tuesday, Mulberry stated that Frasers’ bid, led by Michael Murray, Mr. Ashley’s son-in-law since 2022, failed to acknowledge the company’s “substantial future potential value.”
Michael Murray has overseen Frasers Group since 2022
Additionally, it noted that the bid lacked the endorsement of its majority stakeholder.
Mulberry announced it had consulted with Singapore-based Challice – governed by billionaire Ong Beng Seng and his spouse Christina.
The company expressed confidence in its newly appointed chief executive Andrea Baldo to spearhead a revival and affirmed its commitment to pursue its capital raising strategy.
Pic: Mulberry
This strategy “provides the company with a robust foundation to implement a turnaround and ultimately yield optimal value for all Mulberry shareholders,” it concluded.
Frasers’ proposition, evaluated at 130p per share, estimated the value of the portion of the company it does not own at £52.4 million.
In accordance with UK acquisition regulations, Frasers has until 28 October to submit a formal offer for Mulberry or withdraw.
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On Tuesday morning, Mulberry shares saw a drop of 3%.
Dan Coatsworth, an investment analyst at AJ Bell, remarked on the situation: “Ashley is likely frustrated at being out of the loop regarding Mulberry’s fundraising strategies announced last Friday, particularly as Frasers owns 37% of the business.
“Though Ashley may not directly manage Frasers anymore, being the majority owner of the retail enterprise ensures he remains active behind the scenes. His stake in Mulberry was acquired under his leadership at Frasers, so he may take this rejection very personally.
“Mulberry’s fundraising effort appears perilously close to being a cash grab required merely to maintain operations. Frasers has now intervened with a possible acquisition offer—it may not be overwhelmingly generous, but the circumstances don’t justify a more favorable deal.”
