Frasers Group, owned by billionaire Mike Ashley, has offered £83 million for the remaining shares of Mulberry. The move comes in response to its alleged exclusion from a £10 million capital raise led by Mulberry’s majority shareholder, Challice.
The retail giant holds a 37% stake in Mulberry and values each share at 130p, representing an 11% premium over the closing share price on 27 September. Frasers Group has until 28 October to finalise its intentions.
Frasers Group’s Takeover Bid
Frasers Group, owned by Mike Ashley, has proposed an £83 million takeover bid for Mulberry, criticising its board after allegedly being excluded from discussions about a £10 million fund raise. The retail giant holds a 37% stake in Mulberry and valued each share at 130p. The offer represents an approximately 11% premium to the closing share price on 27 September.
Background to the Offer
The offer from Frasers was made following Mulberry’s announcement of a subscription for new ordinary shares by Challice, Mulberry’s majority shareholder, aiming to raise around £10 million. Frasers Group claimed it was unaware of the subscription until just before its announcement, criticising the “total lack of engagement” and describing it as an “untenable position for Frasers and the other minority holders of Mulberry shares.”
Timing and Financial Context
The indicative offer was launched roughly 24 hours after the subscription announcement. Frasers has until 5pm on 28 October to either announce a firm intention to make an offer for Mulberry or declare that it does not intend to make an offer.
This indicative bid from Frasers Group comes after Mulberry reported a significant decrease in profit, with a pre-tax loss of £34.1 million compared to a pre-tax profit of £13.2 million in 2023. UK retail sales dropped to £84.7 million, down from £87.7 million in 2023, due to changes in consumer spending habits amid “challenging macro-economic uncertainty and inflationary pressures.”
Global Revenue Challenges
The luxury brand has experienced a global retail revenue decline of 14%, with sales in Asia plummeting by 29% year on year. Following the announcement, the firm’s shares plunged more than 12% during early trading sessions. Frasers Group attributes Mulberry’s “unabating difficulties” as a catalyst for its takeover bid.
Mike Ashley’s consortium stated, “With our leading retail expertise and presence, and best in class distribution capability, we believe Frasers to be the best steward for returning Mulberry to profitability.” The group emphasised its commitment to avoiding another situation like Debenhams, where a viable business was run into administration.
Strategy and Prospects
Against the backdrop of challenging macroeconomic circumstances, Mulberry has expressed no expectations for a near-term easing. “The board and the management team continues to monitor conditions and take prudent action to protect margins and make progress towards becoming a global, sustainable luxury brand,” confirmed Mulberry.
Frasers Group’s proposal is rooted in its belief that it can leverage its extensive retail experience to steer Mulberry back to profitability. The group has highlighted its capabilities in retail management and distribution as key assets that would benefit Mulberry under its stewardship.
Market Reactions
The reaction from the market was swift, with Mulberry’s shares dropping by over 12% during early trading sessions following the announcement. Investors appear to be cautious regarding the potential takeover and the ongoing financial challenges faced by Mulberry.
Frasers Group’s bid is seen by some analysts as a strategic move to consolidate its position in the luxury retail sector. Others view it as an attempt to rescue a struggling brand and improve its market standing. The coming weeks will be critical in determining the outcome of this proposed acquisition.
Future Implications
The future of Mulberry hangs in the balance as Frasers Group prepares to finalise its decision. The luxury brand’s current trajectory, marred by financial losses and declining revenues, presents a challenging scenario for any potential acquirer.
Should the takeover proceed, Frasers Group would need to implement significant strategic changes to revitalise Mulberry’s market presence. This may include restructuring efforts, adjustments in product offerings, and enhanced marketing initiatives to realign the brand with consumer expectations.
Conclusion
The coming weeks will be crucial for Mulberry and its stakeholders. The indicative offer from Frasers Group represents a pivotal moment for the luxury brand as it grapples with ongoing financial difficulties and market pressures.
The coming weeks will be critical for both Frasers Group and Mulberry. The proposed £83 million takeover bid could reshape the future of the luxury brand, contingent on strategic decisions and market responses.
Frasers Group’s bid highlights significant discontent with Mulberry’s current management and financial struggles. Whether this acquisition will lead to a revitalised Mulberry remains to be seen.
