Frasers Group PLC on Monday said it is considering a bid to fully acquire investee Mulberry Group PLC, fearing the luxury goods maker could be ‘run into administration’ without a takeover.
The Sports Direct-owner, whose announcement of a possible bid comes after Mulberry on Friday unveiled a nearly £11 million fundraising plan, said it is the ‘best steward’ to turnaround the takeover target’s fortunes.
The possible offer values Mulberry’s shares at 130 pence each, so its entire equity at £83 million. It would value the chunk of Mulberry that Frasers does not own at £52.4 million.
‘As a standalone business, the company is facing unabating difficulties. To name a few, rising costs, macro-economic headwinds, and increased selectivity from its discretionary customer base. Frasers are exceptionally concerned by the audit opinion in the latest annual report released on Friday, 27 September 2024, which notes a ’material uncertainty related to going concern’,’ Frasers said
‘As a 37% shareholder, Frasers will not accept another Debenhams situation where a perfectly viable business is run into administration.’
The 130p offer price is a 30% premium to Mulberry’s fundraising price of 100p. The Mulberry fundraise included a subscription of 10.0 million shares by its 56%-owner Challice Ltd, raising £10.0 million. There is also a retail offer worth £750,000.
Mulberry shares rose 2.1% to 120.00p each in London on Monday morning. Frasers shares were 2.1% lower 848.50p.
Frasers said it did not know of the fundraising plan until ‘immediately prior’ to the Mulberry announcement.
‘As a committed long-term investor in Mulberry, Frasers would have been willing to underwrite the subscription in its entirety, potentially on better terms for the company. Given this total lack of engagement, we believe the status quo to be an untenable position for Frasers and the other minority holders of Mulberry shares,’ Frasers added.
‘Accordingly, having considered carefully the options available to Frasers, approximately 24 hours post the subscription announcement, Frasers submitted a non-binding indicative offer to the board of Mulberry for the entire issued and to be issued share capital of Mulberry, not currently owned by Frasers.
‘Whilst the board of Mulberry provided a holding response on 29 September, given the accelerated timeframe associated with the proposed subscription and the need to progress the proposal expeditiously, Frasers considers their response to be wholly unsatisfactory.’
Mulberry was yet to publicly respond to the Frasers announcement as of around 1030 BST on Monday.
The Bath, England-based on Friday reported revenue in the year to March 30 fell 4.0% to £152.8 million from £159.1 million. Mulberry swung to a pretax loss of £34.1 million from profit of £13.2 million.
Mulberry said: ‘Positive revenue growth in the first six months of the period was offset by a challenging second half, with ongoing macro-economic uncertainty impacting consumer spending in the luxury retail sector.’
For the 25 weeks since the end of the last financial year, revenue is down 18%. Andrea Baldo joined the board as chief executive officer earlier this month.
Mulberry Chair Chris Roberts said: ‘I, along with the wider board have been highly impressed with Andrea’s drive and tenacity in his first few weeks in post. We are confident in our long-term prospects as we move forward into this next chapter.’
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