LONDON – Mulberry’s majority owner Challice Ltd. has asked Frasers Group to cease its pursuit of the accessories brand, and said any attempt at a takeover will fail.
Challice was responding to Frasers’ updated offer for the company, which was lodged after the market closed on Friday, Oct. 11. Frasers has increased its proposed cash offer to approximately 111 million pounds from 83 million pounds, equivalent to 1.50 for each Mulberry share.
In response, Challice reiterated its support for Mulberry, argued that it was an “inopportune time” for the company to be sold, and asked Frasers to walk away.
Challice, which is controlled by the Singapore-based Ong Beng Seng and his wife Christina Ong, described Frasers as a “supportive minority shareholder,” but said it has “no interest” in either selling its Mulberry shares to Frasers, or providing Frasers with any undertakings with regard to its possible offer.
It was the second time in less than two weeks that Challice has rebuffed Frasers, which made its first play for the loss-making Mulberry in late September.
Per stock exchange rules, Frasers has to deliver a firm and final offer to the Mulberry board, or announce that it does not intend to make an offer, by no later than 5 p.m. London time on Oct. 28.
In its statement, Challice described Frasers’ advances as “distracting” both to the company and its management.
Challice also noted that Frasers would need to secure control of more than 50 percent of the issued Mulberry shares for any offer to be successful. Challice, which holds a 56.4 percent stake in Mulberry, argued that without its support, any offer would fail.
“Challice hopes that by making its position clear, Frasers will be encouraged to announce that it does not intend to make an offer for Mulberry,” the statement said.
Challice, which has been a majority shareholder in Mulberry since 2002, has been down this road before with Frasers. This is the second time in four years that Frasers, which was founded and is ultimately controlled by retail tycoon Mike Ashley, has made a run at Mulberry.
In 2020, Ashley built up a stake so high that he was forced to make a bid or leave the company. He eventually walked away.
Ashley specializes in buying stakes in distressed companies, or in companies such as Mulberry, which sell through his retail chains.
On Friday, Frasers said it was flummoxed as to why its original offer was rejected.
Frasers described Mulberry’s latest financial results as “catastrophic,” and said it strongly believes it can provide the “appropriate insulation and investment to support a much-loved British brand. As part of the Frasers portfolio, the Mulberry brand would be provided with the platform to ensure its long-term survival and success.”
Frasers hasn’t exactly proven itself as a great caretaker of luxury brands.
Late last year, it purchased Matches at a knockdown price of 52 million pounds, and then placed it into administration shortly afterwards. Frasers bought back the IP, and administrators sold off millions of pounds of fashion stock, leaving many of Matches’ designers and brands trying to recoup their losses.
Having originally touted the Matches purchase and positioned itself as the troubled company’s savior, Frasers quickly concluded that Matches was too expensive to bankroll against a backdrop of dwindling luxury demand, and a cost-of-living crisis.
In the last fiscal year, Mulberry reported a 4 percent decline in sales, and swung to a loss before tax of 34.1 million pounds.
Challice has acknowledged the challenges it is facing with Mulberry, and has also underwritten a capital raise of 10.75 million pounds to help restore the brand’s fortunes and deliver value to shareholders.
Frasers has challenged Challice’s strategy, saying it has “significant reservations” that the new capital raised would be enough to support the business through the near to medium-term.
“It is Frasers’ belief that this will lead likely to another capitalization event … unless there is immediate and very real change at the company,” it said.
