Frasers Group’s surprising £83m offer to purchase Mulberry reflects its strategic expansion into the luxury sector.
- The takeover bid offers a premium on Mulberry’s share price amidst the brand’s financial woes, marking a pivotal moment for Mulberry.
- Already a significant shareholder, Frasers seeks to strengthen Mulberry’s financial position after recent losses and a capital raise.
- Mulberry’s response to the offer sets up a potential clash with its current majority stakeholder, Challice.
- The outcome of the bid could reshape Mulberry’s business landscape, amid broader challenges in the luxury market.
Frasers Group has made an unexpected £83 million bid to acquire Mulberry, a move that underscores its ambitions to delve deeper into the luxury market. This offer, which provides a 130p per share, represents an 11% premium on the closing price from the previous Friday. Frasers positions itself as the best candidate to restore Mulberry’s profitability, leveraging its existing 37% stake in the company.
The backdrop to this bid is Mulberry’s recent financial struggles. The brand, famed for its Bayswater handbags, has been grappling with a £34 million pre-tax loss for the year ending March 2024, alongside a 4% drop in sales to £153 million. To combat these challenges, Mulberry announced a critical £10.75 million capital raise, an initiative underwritten by its majority shareholder, Challice.
Frasers Group’s offer comes amid criticism of Mulberry’s engagement with its shareholders over the rights issue, which Frasers sees as unsustainable for minority holders. The financial instability at Mulberry has been further highlighted by the company’s auditor, who noted ‘material uncertainty’ regarding its financial health in the latest annual report.
The potential takeover introduces a contest between Frasers and Challice, which is controlled by Ong Beng Seng and Christina Ong. While Challice has maintained Mulberry’s exclusive luxury brand reputation since 2003, Frasers’ acquisition could pivot Mulberry towards more mainstream channels, which may impact its luxury status.
Frasers Group is keen to avoid another ‘Debenhams situation’—a reference to the collapse of the department store chain, where it lost a £300 million investment. Thus, this bid is not just a financial move but a strategic one to safeguard its interests in British brands.
Mulberry has recently appointed Andrea Baldo as CEO, who has pledged to focus on operational efficiency and core UK markets as a stabilisation strategy. Nevertheless, ongoing challenges in the luxury sector continue, exacerbated by global economic conditions and supply chain disruptions, notably impacting markets like China.
As luxury markets face ongoing pressures, Mulberry’s future hangs in the balance amid Frasers Group’s audacious takeover bid.
