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Mike Ashley’s Frasers Group has made a conditional offer for Mulberry, valuing the UK luxury brand at £83mn, after a “wholly unsatisfactory” response to an initial approach at the weekend.
Frasers, which owns about 37 per cent of Mulberry’s shares, said it had been taken by surprise when Mulberry proposed on Friday to raise almost £11mn from existing shareholders, including its largest investor — the Singapore-based Ong family who holds a 56 per cent stake.
Frasers said it had not been aware of the plan, which was designed to prop up the luxury group’s balance sheet, until “immediately prior to its announcement”, and would have been willing to fund it on potentially better terms.
Frasers has offered 130p per share, a premium of 11 per cent to the closing price on Friday, and said it was “the best steward to return Mulberry to profitability”. The board provided a “holding response” to its conditional offer on Sunday, a move that Frasers considered inadequate. Mulberry shares rose 11 per cent on Monday.
Mulberry said on Friday that it needed to raise cash to give it financial flexibility, after falling to an annual pre-tax loss of £34mn, from a £13mn profit the previous year, on a 4 per cent drop in revenue to £153mn.
Frasers said that as an existing shareholder it would “not accept another Debenhams situation where a perfectly viable business is run into administration” after Mulberry noted a “material uncertainty related to going concern” in its annual report.
Debenhams went bust in 2020, having rejected a last-ditch rescue plan by Frasers — then called Sports Direct — which was a shareholder as part of an acrimonious battle with Debenhams’ board for control of the business.
Mulberry declined to comment on Monday. Frasers has until October 28 to either make a formal offer or walk away.
In July Mulberry appointed Andrea Baldo, the ex-boss of Ganni, as its new chief executive, replacing Thierry Andretta, who left with immediate effect, after the company became the latest luxury brand to warn of a slowdown in spending among affluent shoppers.
In 2020, Frasers, the retail conglomerate controlled by sportswear tycoon Ashley, bought a stake in Mulberry, which is a significant supplier to House of Fraser, the department store group also owned by Frasers following its collapse in 2018.
Ashley’s group also has a stake in Hugo Boss and owns upmarket department store chain Flannels.
Clive Black, head of consumer research at Shore Capital, said: “No doubt there will be much emotion and potential shenanigans around this illiquid stock that has had to face into well-versed UK luxury market headwinds in recent times.
“Quite whether the two large and dominating shareholders can come to an agreement will be at the heart of the next steps.”