Mike Ashley’s Frasers Group makes bid for Mulberry

Luxury handbag manufacturer Mulberry has received a takeover bid from Mike Ashley’s Frasers Group, valuing the struggling brand at £83 million. This approach comes in the wake of significant challenges faced by Mulberry, including a sharp decline in sales within the luxury market.

Frasers Group, which also owns well-known retail brands such as Sports Direct, Flannels, and Evans Cycles, already holds a 37% stake in Mulberry. The proposal for the takeover was announced shortly after Mulberry revealed it needed to raise nearly £11 million to strengthen its financial position. Frasers Group stated it was only informed of Mulberry’s fundraising plans just before the public announcement, leading to concerns about the lack of communication from the handbag maker’s management.

In a statement, Frasers expressed its frustration, saying, “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.” The company also voiced serious concerns about its auditor’s comments in the annual report, which flagged “material uncertainty related to going concern.” This indicates potential doubts about Mulberry’s financial stability.

Frasers Group emphasized its unwillingness to see Mulberry follow in the footsteps of Debenhams, which went into administration in 2019 after years of declining sales, exacerbated by the impact of the Covid pandemic. “As a 37% shareholder, Frasers will not accept another Debenhams situation where a perfectly viable business is run into administration,” they stated, highlighting the urgency for change within Mulberry.

Analyst Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted the clear frustration from Mike Ashley regarding Mulberry’s management. She remarked, “Keeping it quiet indicates that the [Mulberry] board didn’t want to give Frasers the early option of owning an even bigger chunk of the company.” She added that investors may be losing patience, particularly since Mulberry’s share prices have dropped by 52% over the past year.

Frasers Group has already made moves to enhance its portfolio, including increasing its stake in high-end fashion brand Hugo Boss, reflecting its strategy to position itself more firmly in the upscale retail market.

In its latest financial results, Mulberry reported a pre-tax loss of £34.1 million for the year ending in March, a significant drop from the £13.2 million profit recorded in the previous year. Group sales also fell by 4%, totaling £152.8 million. Following the announcement of Frasers’ bid, Mulberry’s share price saw a nearly 8% increase, rising to 126.8p each.

The potential takeover by Frasers Group could provide the much-needed capital and strategic direction that Mulberry requires to navigate its current challenges. With the luxury sector facing a downturn, this move could signal a significant shift in the ownership and future of Mulberry, providing an opportunity for revitalization under Frasers’ experienced management.

The ongoing situation will be closely monitored by investors and industry analysts, as the outcome could have broader implications for the luxury retail market. Should the takeover proceed, it would mark a notable chapter in both companies’ histories, potentially reshaping the landscape of high-end fashion retail in the UK.