Frasers Group makes £83m offer for Mulberry

Mike Ashley’s Frasers Group has made an £83 million cash offer for Mulberry amid concerns about the future of the struggling British luxury handbag maker.
Frasers, a minority shareholder in Mulberry, said it had put forward a cash offer of 130p a share after Mulberry announced an emergency £10.75 million placing of shares to boost the balance sheet.
Mulberry is planning to issue new shares worth £10 million, underwritten by its main shareholder, Challice.
Challice, which owns 56 per cent of the leather goods company, is controlled by the Singapore-based Ong Beng Seng and his wife, Christina Ong.
Frasers Group already owns a 37 per cent stake in Mulberry. Its offer values the remaining shares it does not own at £52.4 million and will need the Ongs’ approval to succeed. Mulberry’s share price, which stood at 125p on Friday, was trading at around 100p this morning before recovering to 128p after the Frasers offer was announced.
Frasers, the retail group controlled by Ashley which owns Sports Direct, House of Fraser and Flannels, said its offer was a 30 per cent premium on the 100p subscription price on Mulberry’s retail offer and was 11 per cent higher than the closing share price on Friday.Frasers said it was “exceptionally concerned” after Mulberry auditors flagged a “material uncertainty related to going concern” when it published its annual accounts after the market closed on Friday and announced the fundraising.
Frasers said it would “not accept another Debenhams situation where a perfectly viable business is run into administration”. Debenhams, the department store chain, collapsed in 2019.
Mulberry had said it needed to raise fresh funds after a tough 12 months, which saw the brand fall to a £34 million pre-tax loss in the year to the end of March, from a £13 million profit the year before, after sales dropped by 4 per cent to £153 million. Sales declined by 18 per cent in the 25 weeks after the financial year ended.
Frasers criticised Mulberry for not informing it about the plan to raise more funds, saying it was “not aware of the [planned cash raising by Mulberry] until immediately prior to its announcement” and would have been willing to underwrite it on better terms than those announced.
“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,” it said.
Mulberry said the net proceeds from the fundraising would be used to strengthen its balance sheet and enable Andrea Baldo, its new chief executive, to execute his strategy for the leather goods seller.
Baldo, a former chief executive of Ganni, the Danish fashion label, was named as Mulberry’s new boss in July after Thierry Andretta, Mulberry’s chief executive for almost a decade, was ousted after he failed to reverse its fortunes.
The Bath-based company, best known for its Bayswater handbags, has struggled amid the wider downturn in the global luxury market.
Mulberry issued its delayed final results for the year to the end of March after-hours on Friday, which revealed the true extent of its woes.
It said positive revenue growth in the first six months of the year had been offset by a challenging second half, “with ongoing macro-economic uncertainty impacting consumer spending in the luxury retail sector”.
Its UK and Asia-Pacific retail sales fell during the period, while international sales increased by 8 per cent to £50 million, driven by developments in Sweden, the US, Australia and New Zealand, Mulberry said.
Digital sales increased by 4 per cent to £50.6 million, representing 33 per cent of group revenue.
The group said its debt facilities had been increased to £27.5 million, with renegotiated covenants “to reflect the current trading environment”.
Baldo said he had been working closely with the Mulberry teams in the UK and internationally “to drive swift, decisive actions. In the short term, we are focused on enhancing operational efficiency and implementing targeted product, pricing and distribution strategies to regain market share in our core market of the UK.”
He said the immediate measures were “critical” and that he was committed to “conducting a comprehensive review to develop a refreshed strategy that will position the group for both short-term recovery and long-term, sustainable growth”.
Chris Roberts, the Mulberry chairman, said: “While the financial performance for the year was disappointing, we believe that the combination of the appointment of a new CEO, our new debt facility, and the capital raising announced today will put the group on a firm footing to ensure we are well set up for future growth.
“We are confident in our long-term prospects as we move forward into this next chapter.”