- Fresh bid spurned by Challice
- Challice has ‘no interest’ in selling
- Mulberry board considering its position
Struggling luxury handbag maker Mulberry (MUL:AIM) is weighing up a sweetened £111 million bid from Frasers (FRAS), although its majority owner is standing in the way of a takeover by refusing to sell its shares to the Mike Ashley-controlled conglomerate.
Mulberry’s biggest shareholder with a 56.4% stake, Challice has ‘no interest’ in selling any of its shares to Frasers, which has little chance of winning the bid as a result.
Shares in high-end handbags-to-belts seller Mulberry rallied 16% to 130p after the board said it is working with advisers to ‘consider the company’s position’, adding that a further announcement will be made ‘in due course’.
Yet the bounce left the shares trading well below Frasers’ increased price on the table, which was the market’s way of saying it doesn’t believe this is the winning deal.
CHALLICE A MAJOR OBSTACLE
The latest statement (14 October) from Mulberry arose after Sports Direct-owner Frasers, which has been increasing its presence in luxury and has a 37.3% stake in Mulberry, tabled a sweetened 150p per share offer for the British luxury brand on 11 October.
Its previous £83 million, or 130p per share, bid was rebuffed on valuation grounds earlier this month.
Mulberry’s board said it had noted Frasers revised possible cash offer from 11 October pitched at 150p per share, but also highlighted a press statement by Challice on 13 October.
Singaore-based Challice praised Frasers’ decision to participate in the fundraising round in which it bought £3.9 million worth of new Mulberry shares, yet insisted it is backing new CEO Andrea Baldo’s turnaround strategy and has ‘no interest in either selling its Mulberry shares to Frasers or providing Frasers with any irrevocable or other undertaking’.
Controlled by billionaire Ong Beng Seng, Challice also stressed that Frasers would be unable to take over Mulberry without its support, and added it ‘hopes that by making its position clear, Frasers will be encouraged to announce that it does not intend to make an offer for Mulberry.’
Challice also stressed that it believes in the long-term value of Mulberry, which lurched into loss for the year ended 30 March 2024 amid falling sales and rising costs.
Under the City takeover rules, Frasers has until 28 October to make a firm offer for Mulberry or walk away.
THE EXPERT’S TAKE
Russ Mould, investment director at AJ Bell, explained: ‘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.’
Mould continued: ‘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.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
