Frasers Group Targets Mulberry In $111 Million Bid After Sales Warning

The U.K’s most acquisitive retailer is back in the market again, this time for luxury brand Mulberry after filing a possible offer valuing the business at $111 million in a bid for the British handbag maker.

Frasers Group is the owner of a host of retail brands from Sports Direct and Evans Cycles to the House of Fraser department store chain, luxury fashion chain Flannels and multiple brands across apparel and sports, which colorful Frasers’ supremo Mike Ashley has been buying, often in distress sales.

Frasers Group has also been picking up shopping centers and retail parks around the U.K., mostly anchored by its brands, and already has a 37% holding in Mulberry. It said it was making an offer for the remainder of the company after Mulberry announced an emergency $14.4 million placing of shares to boost its balance sheet late on Friday.

Mulberry had said it needed to raise cash through the issue of 750,000 additional sales priced at $1.34 each plus a $13.4 million subscription offer from majority shareholder Challice after it reported a $45.6 million pre-tax loss in the year to the end of March, in contrast with a $17.4 million profit a year prior, after sales declined by 4% to $205 million. It added during the update that sales were down by 18% for the 25 weeks since the period ended.

Mulberry Warns On Downturn

While there is no suggestion it is at any immediate risk of business failure, Mulberry’s accounts did include a warning that the downturn had resulted in a "material uncertainty which may cast significant doubt on the group and parent company's ability to continue as a going concern" if it persisted.

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It would be fair to say Ashley did not take that well and in a statement issued on Monday, Frasers said it would “not accept another Debenhams situation where a perfectly viable business is run into administration”, referring to the collapse of the U.K. department store in 2019, which wiped out shareholders such as Ashley’s retail group.

He had invested just over $200 million into the business as he accumulated a near-30% stake in the business and was furious to see his holding become worthless.

The statement said the group had not been aware of the planned cash raising by Mulberry until immediately prior to its announcement and went on the state that it would have been willing to underwrite it on more favorable terms than those announced.

Mulberry’s share price, which stood at about $1.68 on Friday before the announcement, has dipped and risen following the announcement but has recovered some of its overall losses since and was trading at circa $1.55 on Monday.

Meantime, Ashley’s non-binding offer is $1.74 a share, valuing the company at $111 million, but is subject to a host of conditions – including ditching the proposed share placement and full backing of the Mulberry board.

Challice And Frasers Seek Control

Mulberry shares were trading at around $2.15 at the start of the year and the current majority shareholder is Challice, which is controlled by Singaporean entrepreneur Christina Ong. Challice has pledged to underwrite the share placing, suggesting that Ong remains prepared to back Mulberry's new chief executive, Andrea Baldo – formerly at the helm of fashion label Ganni, and previously involved in the turnaround of Italian streetwear brand Diesel – who only joined Mulberry on Sept. 1.

Frasers is 73%-owned by Mike Ashley's MASH Holdings vehicle but the retail business is now run by his son-in-law Michael Murray. Under U.K. takeover rules, Frasers has until Oct. 28 to make a firm offer for Mulberry or walk away.

Mulberry was founded in 1971 by entrepreneur Roger Saul and his mother Joan but in recent years has struggled amid the increasing competitive luxury market and more challenging times for the sector as a whole.