Mike Ashley’s sprawling retail empire Frasers Group has revealed a takeover bid for Mulberry, the struggling luxury brand, claiming it wants to save the company from a potential Debenhams-style collapse.
Frasers, which already owns 37% of Mulberry’s shares, said it had made a non-binding approach for the stock it does not already hold.
Its 130p-per-share offer values Mulberry at £83m.
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It represented an 11% premium on Friday’s closing price, Frasers said.
Earlier that day, Mulberry had announced a move to raise cash through the sale of 750,000 new shares to existing shareholders, priced at £1 each, after slumping to a £34.1m loss over its last financial year.
It also sought to raise £10m through a so-called subscription offer by its majority shareholder Challice.
The Somerset-based firm, best-known for its handbags, has been suffering amid weak global demand for luxury goods.
There is no suggestion it is at any immediate risk of collapse but its accounts contained a warning that the downturn had resulted in a “material uncertainty which may cast significant doubt on the group and parent company’s ability to continue as a going concern” if it persisted.
Advertisement Image: Mulberry opened a new store in Dubai Mall in April as part of its international expansion plans. Pic: MulberryFrasers said: “Frasers are exceptionally concerned by the audit opinion in the latest annual report released on Friday September 27, 2024, which notes a “material uncertainty related to going concern”.
“As a 37% shareholder, Frasers will not accept another Debenhams situation where a perfectly viable business is run into administration.”
Frasers had held a stake in Debenhams worth £300m at one stage but its holding was wiped out in 2019 when it collapsed in April of that year.
Frasers, which is best known for its Sports Direct and Flannels brands, is 73%-owned by Mike Ashley’s MASH Holdings vehicle but now run by his son-in-law Michael Murray.
4:59 July: Frasers boss Murray outlines strategyFrasers owns more than 40 consumer names including House of Fraser, Game, Evans Cycles, Jack Wills, Gieves & Hawkes and Agent Provocateur.
Its sports equipment and sports and leisurewear interests include Slazenger, Sondico, No Fear, Donnay, Everlast and Karrimor
In more recent times it has built large stakes in the likes of ASOS and Boohoo and acquired commercial property including a number of shopping centres.
Mr Murray told Sky News in an interview this summer that its elevation strategy – taking the company up-market – remained on track despite the immediate challenges facing the luxury sector, hurt by falling demand particularly in key growth areas such as China.
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Shares in Frasers were trading more than 2% down on the day in the wake of its approach.
Those of Mulberry were 6% higher at 125p, reflecting the 130p-per-share value Frasers had placed on the stock.
Mulberry was yet to comment on Frasers’ move, which is subject to its board’s recommendation and the withdrawal of the subscription offer.
Under UK takeover rules, Frasers has until 28 October to make a firm offer for Mulberry or walk away.
Ashley frustrated with Mulberry
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said of the situation: “Mike Ashley’s frustration with Mulberry is plain to see. The offer to buy the beleaguered handbag maker, comes after it unexpectedly announced a plan to raise emergency funds, which also took Frasers Group by surprise.
“Keeping it quiet indicates that the board didn’t want to give Frasers the early option of owning an even bigger chunk of the company. However, investors may also be losing patience, given that Mulberry’s shares have fallen by 52% over the past year.”