Frasers Group’s attempted takeover of Mulberry has stirred the fashion industry.
- Mulberry rejected an £83 million offer from Frasers, citing undervaluation.
- Mulberry’s majority shareholder Challice supports its turnaround strategy.
- Frasers Group cites poor performance and concerns over governance.
- The deadline for Frasers’ firm offer is 28 October 2024.
Frasers Group’s recent £83 million bid to acquire Mulberry has created ripples across the fashion industry. Mulberry swiftly rejected this offer, stating that it “does not recognise the company’s substantial future potential value.” The luxury fashion brand is backed by its majority shareholder, Challice, which holds a 56.1% stake compared to Frasers’ 36.8%. Challice has shown firm support for Mulberry’s current turnaround strategy under new CEO Andrea Baldo, and has expressed no interest in endorsing Frasers’ potential offer.
The takeover bid by Frasers comes amidst Mulberry’s financial struggles, which include posting a pre-tax loss of £34.1 million in the fiscal year ending 30 March 2024—a stark contrast to the previous year’s profit of £13.2 million. Sales have fallen by 18% in the first 25 weeks of the current financial year. Several factors contribute to this decline, including the downturn in the luxury market, a consumer shift away from purchasing in the UK due to the removal of tax-free shopping, and increased operational costs.
Frasers Group, which originally invested in Mulberry in February 2020, asserts its ability to steer the brand back to profitability, drawing on its extensive retail experience and strong distribution capabilities. Yet, Frasers’ history in luxury markets is marked by mixed results, such as the recent administration of Matches Fashion, which casts doubt on its assurance.
Despite concerns voiced by retail analysts about the potential success of a Frasers-led takeover, Frasers remains undeterred. It claims to refuse to passively encounter “another Debenhams situation,” where a failing business deteriorates into administration. Frasers insists that Mulberry’s current situation, characterised by “rising costs, macro-economic headwinds, and increased selectivity from its discretionary customer base,” necessitates a more engaged approach to management.
Under UK takeover regulations, Frasers has until 28 October to submit a formal offer or retreat from the bid. However, given that Challice—Mulberry’s primary investor—remains unsupportive of the takeover, and holds a significant majority stake, Frasers faces a challenging path ahead. Analyst Nick Bubb points out that Frasers has found itself in a familiar minority stakeholder dilemma, echoing scepticism about the likelihood of a successful purchase. Despite these hurdles, Mike Ashley and Frasers Group are known for their tenacity, suggesting that the Mulberry saga may yet continue.
Frasers Group’s pursuit of Mulberry underscores its commitment to expanding its foothold in luxury fashion despite considerable challenges.
