Luxury handbag specialist Mulberry has spurned an £83m takeover offer from the Frasers business developed by retail tycoon and former Rangers shareholder Mike Ashley, who has capitalised on upheaval in the sector.
Mulberry, which has stores in Glasgow and Edinburgh, said the 130p per share approach by Frasers failed to recognise its “substantial potential future potential”. However, the business faces big challenges.
Last week Mulberry revealed it had plunged £34 million into the red in the latest year following a sharp drop in sales.
The company said then that ongoing macro-economic uncertainty was impacting consumer spending in the luxury retail sector.
Frasers decided to bid for Mulberry after the group announced plans to raise cash from investors at 100p per share in a move that it opposed.
Frasers has amassed a 37% holding in Mulberry since 2020.
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The fund-raising proposed by Mulberry could result in the Singaporean investors who have a 56% interest in the company’s shares increasing their hold on the business.
Frasers said it may have been prepared to offer funding on better terms as a committed long-term investor in Mulberry. The company said it would be the best steward to return Mulberry to long-term profitability.
It noted: “The Company is facing unabating difficulties. To name a few, rising costs, macro-economic headwinds, and increased selectivity from its discretionary customer base.”
Frasers believes it has shown it could lead a successful recovery for Mulberry after breathing fresh life into other retail brands which it acquired amid challenging sector conditions.
The group’s portfolio includes the House of Fraser department store business and the Flannels, Gieves & Hawkes, Jack Wills and USC clothing brands.
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In March last year Frasers acquired Dundee’s Overgate shopping centre in a move the group said reflected its commitment to the future of physical retail. It plans to open a store in the centre that will market aspirational brands.
Frasers signalled that its move on Mulberry reflected frustration that the group invested in Debenhams shares only to see the high street giant collapse in 2021 after rejecting an offer of funding from the group.
“As a 37% shareholder [in Mulberry], Frasers will not accept another Debenhams situation where a perfectly viable business is run into administration,” said the group.
Mulberry said directors believed the recent appointment of fashion sector veteran Andrea Baldo as chief executive combined with the proceeds of the proposed fund-raising would provide the company with a solid platform to execute a turnaround. This would deliver best value for all Mulberry shareholders.
The judgement followed consultation with 56% shareholder Chalice, which Reuters noted is owned by billionaires Christina Ong and Ong Beng Seng.
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Frasers has until October 28 to make a formal offer for Mulberry or walk away.
The group developed out of the Sports Direct operation which Mr Ashley founded in Maidenhead in 1982.
Rangers became embroiled in a long-running legal dispute with Sports Direct concerning a kit supply deal with the firm that ended in 2020.
Mr Ashley acquired a 9% holding in Rangers shares, the last of which he sold in 2017 to the Club 1872 syndicate of fans groups and Hong Kong investor Julian Wolhardt.
In 2020 Rangers agreed a multi-year kit supply deal with Liverpool-based Castore.
Mr Ashley was succeeded as chief executive of Frasers by Michael Murray in 2022 but retained a majority stake in the business.
Mulberry was founded in Somerset in 1971.
The group benefited from debt-funded surges in consumer spending that followed the cuts in interest rates made by the Bank of England following the financial crisis of 2008 and in response to the pandemic that started in 2020.
Trading conditions got tougher for luxury retailers after the Bank imposed a series of interest rate increases from December 2021 to tackle the sharp increases in the rate of inflation that started amid the recovery from the pandemic.
Mulberry shares closed up 6p at 130p.
Shares in the group sold for 386p in 2021.
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