Mulberry has revealed its largest shareholder has rejected a fresh takeover approach from Mike Ashley's Frasers Group for the luxury handbag maker.

Shares in the London-listed fashion firm surged nearly 20% yesterday after stating that it is working with advisers from Houlihan to consider its position.

It added that a further announcement will be made in due course.

The development came after Sports Direct owner Frasers Group tabled an improved £111 million approach to buy Mulberry on Friday.

Frasers, which has been expanding its luxury business over recent years, already owns roughly 37% stake in the company.

It offered to pay 150p per share for the rest of the business it did not already own in order to take control. A a previous 130p per share move, which valued Mulberry at £83 million, was rebuffed earlier this month.

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Mulberry confirmed yesterday that its largest shareholder Challice, a group controlled by Singaporean entrepreneur Christina Ong and husband Ong Beng Seng, said they did not plan to sell to Frasers.

The group is majority shareholder with a roughly 56% stake in the company and would need to vote in favour for any takeover deal to be approved.

Mulberry said that Challice "has no interest in either selling its Mulberry Shares to Frasers or providing Frasers with any irrevocable or other undertaking".

Challice added that it feels it is "an inopportune time for Mulberry to be sold and particularly regrets the distraction that the possible offer is bringing to the company".

Russ Mould, investment director at AJ Bell, declared Frasers has “little chance of winning the bid for Mulberry given the gigantic obstacle in its path”.

He said: “The presence of a 56% shareholder in Challice means Mulberry’s hands are tied regarding a takeover. Whatever Challice says goes, as its majority stake effectively gives it control of the company. Frasers is also a big shareholder but its 37% stake just isn’t big enough to call the shots.

“Challice wasn’t swayed by Frasers’ original takeover approach, perhaps because it has visions of morphing Mulberry into its own luxury goods interests.

“Everything now rides on Challice being won over by Frasers’ enhanced offer, which has been lifted to 150p per share. Although generous relative to where the stock has traded this year, the bid is still a fraction of the 300p-plus level at which the shares traded only a few years ago, therefore it is unlikely to cut the mustard with Challice.

“It’s notable that Mulberry’s shares have only bounced to 126p on Frasers’ revised bid, leaving them well below the actual price on the table. That’s the market’s way of saying it doesn’t believe this is the winning deal.”

Susannah Streeter, head of money and markets at stockbroker Hargreaves Lansdown, suggested investors will have been "enthused" by the Frasers approaches. “It’s still handbags at Mulberry, with Challice, the largest shareholder batting away the latest bid from Frasers Group," she said.

"Mike Ashley’s company had significantly sweetened its bid but the offer of 150p a share, valuing the company at £111m has been rejected by the group controlled by Christina Ong and husband Ong Beng Seng. Getting their buy-in is crucial given that they control a 56% stake in the company.

“Words of frustration have been pumped out from both sides. Frasers Group has clearly lost so much faith in the current direction of the company, it’s fearful of collapse and has warned it does not want to see another Debenhams-style scenario play out. But Challice is also clearly exasperated by the relentless focus, wanting to give the new CEO, Andrea Baldo a chance to bed in and help revive the brand’s fortunes.

“Nevertheless, shareholders have been enthused by this latest turn of events, with shares climbing 20%, to reflect the improved offer, and the announcement by the board that its working with advisers to consider the company’s position.

“There are still hopes for a higher bid to come through but whatever the outcome, the bigger price tag slapped on Mulberry’s has enthused investors and hopes for the brand’s turnaround.’’

Shares in Mulberry closed up 17.8%, or 20p, at 132.5p.