Frasers makes £83m takeover bid for Mulberry, shares jump

30th Sep 2024 10:09

(Sharecast News) - Mike Ashley's Frasers Group said on Monday that it had made an £83m takeover bid for Mulberry, as it criticised the luxury handbag retailer for not informing it of plans to raise £10m.

Mulberry announced on Friday that it was planning to raise £10m through the issue of new ordinary shares and a retail offer of up to £750,000. This came alongside the company's full-year results, which showed it swung to a reported pre-tax loss of £34.1m from a profit of £13.2m a year earlier.

The company, which first invested in Mulberry in February 2020 and now owns a 37% stake, said it was not aware of the proposed subscription until immediately prior to the announcement.

Since then, Frasers said it has taken "quick action to consider and assess the possible options available".

"As a committed long-term investor in Mulberry, Frasers would have been willing to underwrite the subscription in its entirety, potentially on better terms for the company," it said. "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."

As a result, Frasers later submitted a non-binding indicative offer for Mulberry at 130p per share in cash. This implies a valuation of about £83m and is a premium of approximately 11% to the closing share price on 27 September.

"We have long been supportive of the brand and commercial opportunities available to the company," Frasers said.

"With our leading retail expertise and presence, and best in class distribution capability, we believe Frasers to be the best steward for returning Mulberry to profitability."

At 1150 BST, Mulberry shares were up 11% at 130p, while Frasers shares were down 2.2% at 848p.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Mike Ashley's frustration with Mulberry is plain to see. The offer to buy the beleaguered handbag maker, comes after it unexpectedly announced a plan to raise emergency funds, which also took Frasers Group by surprise. Keeping it quiet indicates that the board didn't want to give Frasers the early option of owning an even bigger chunk of the company.

"However, investors may also be losing patience, given that Mulberry's shares have fallen by 52% over the past year. Frasers Group has already been taking steps to move upmarket, given that its upped stakes in Hugo Boss and its portfolio also includes Savil Row tailor Gieves and Hawkes. Owning Mulberry outright would bolster that plan and would offer a deeper well of finance to help turn the brand's fortunes around."