Mulberry Group PLC on Tuesday rejected the takeover approach from Mike Ashley’s Frasers Group PLC after receiving the backing from its majority shareholder.
Bath, England-based Mulberry, famous for its handbags, said the possible offer from the Sports Direct store chain owner ‘does not recognise the company’s substantial future potential value’.
‘The board believes that the combination of the recent appointment of Andrea Baldo as [chief executive] alongside the recently announced subscription and retail offer provides the company with a solid platform to execute a turnaround and, ultimately, to deliver best value for all Mulberry shareholders,’ the company said in a statement.
Mulberry said it had the support of majority shareholder, Challice Ltd, which holds 56.1% of the firm. Frasers has 36.8%.
Mulberry said it had no plans to withdraw fund raising plans but would engage with Frasers regarding a pro rata participation in the subscription.
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. Both are at 100 pence per new share.
On Monday, Frasers announced a possible offer that values Mulberry’s shares at 130p each, so its entire equity at £83 million. It would value the chunk of Mulberry that Frasers does not own at £52.4 million.
Shares in Mulberry rose 4.9% to that 130.00p price in London on Tuesday morning before reversing to 121.89p, down 1.7% on the day. Frasers was down 0.1% at 832.50p.
‘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 had said on Monday.
‘As a 37% shareholder, Frasers will not accept another Debenhams situation where a perfectly viable business is run into administration.’
Frasers said it did not know about 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.
Frasers has until close of business on October 28 to make a firm bid for Mulberry.
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