Luxury fashion brand Mulberry has declined an £83 million takeover bid from Frasers Group, led by Mike Ashley.
Mulberry has indicated it will proceed with a planned capital raise instead of accepting the offer.
Reasons for Rejection
Mulberry has chosen to reject the takeover proposal from Frasers Group, stating that the bid “does not recognise the company’s substantial future potential value”. The company has engaged in discussions with its majority shareholder, Singapore-based Chalice, which is controlled by billionaire Ong Beng Seng and his wife Christina.
Trust has been placed in Andrea Baldo, the newly appointed chief executive, to drive the company’s turnaround. The decision is in line with Mulberry’s broader strategy to enhance its financial standing through a capital raise.
Capital Raising Plans
The board of Mulberry has reiterated its intention to go ahead with the capital raising plan announced on 27 September 2024. According to the company, this method will enable all shareholders to access additional equity funding on equal terms. This approach is viewed as the most fair and effective way to bolster financial resources.
In acknowledging Frasers Group’s significant investment stake and interest, Mulberry has indicated its willingness to engage with Frasers regarding a pro rata participation in the subscription plan. This indicates Mulberry’s openness to future collaboration within clearly defined parameters.
Frasers Group’s Position
Frasers Group revealed its acquisition approach on Monday, proposing a valuation of 130p per share, which values the stake not currently owned by them at £52.4 million. Frasers, known for its ownership of Sports Direct, already holds a 37% stake in Mulberry.
The retail giant has expressed disappointment over Mulberry’s decision, highlighting their initial intention to underwrite the subscription to aid in Mulberry’s financial recovery.
Historical Context
Founded by Roger Saul in 1971, Mulberry has a long-standing history rooted in Somerset. Initially known for its buckled leather belts, the brand expanded its range to include bags and womenswear. Mulberry’s iconic tree logo, designed by Saul’s sister, remains a significant part of its brand identity.
In recent years, Mulberry has faced financial challenges, attributed primarily to decreased consumer spending. The company’s latest financial results revealed a loss before tax of £34.1 million for the full year, a stark contrast to the £13.2 million profit reported the previous year.
Challenges in the Retail Sector
The retail sector has been experiencing significant pressures due to tightening consumer spending and broader economic uncertainties. Mulberry is not isolated in facing these challenges, as numerous other retailers are grappling with similar issues.
In light of these challenges, Mulberry’s decision to focus on internal capital raising rather than an acquisition underscores its confidence in its long-term strategy and leadership team. This is further emphasized by their commitment to a turnaround plan under the guidance of their new chief executive.
Strategic Outlook
Mulberry’s strategic outlook appears to be centred on self-reinvention and financial stability. The company believes that its turnaround plan, supported by the anticipated capital raise, will provide the necessary platform to maximise shareholder value.
With a re-energized leadership and a clear path for financial recovery, Mulberry aims to navigate through current market challenges and emerge stronger. This strategy aligns with the broader goals of sustaining growth and enhancing brand value.
Conclusion of the Offer
The rejection of the £83 million offer from Frasers Group signifies Mulberry’s commitment to its own strategic plans. Confidence in its leadership and future potential remains high amongst its stakeholders.
Mulberry’s refusal to terminate the capital raise plan signifies a determined approach to achieving financial stability through internal measures, reinforcing its vision for long-term growth.
Mulberry’s decision to decline the takeover bid from Frasers Group underscores its belief in its own strategic direction and growth potential.
By focusing on a capital raise, the company aims to fortify its financial base and drive forward its turnaround plan under new leadership.
