Mulberry considering position as Challice rejects new Frasers offer

14th Oct 2024 07:04

(Sharecast News) - Luxury handbag maker Mulberry on Monday said it was considering its position after major shareholder Challice said it had no intention of selling its 56% stake to Mike Ashley's Frasers Group despite an increased £111m bid for the company.

The statement came after Frasers, which already holds 37% of Mulberry, upped its offer for the rest of the firm to 150p a share from 130p late on Friday after an earlier £83m bid was rejected by the company earlier this month.

Challice is controlled by Singaporean entrepreneur Christina Ong and her husband, Ong Beng Seng and can block any bid. It called on Frasers to abandon its bid, saying it came at an "inopportune time" for the struggling brand.

Frasers made its initial offer in an angry response to an emergency £10.75m placing of shares in the luxury group last month to support its balance sheet after slumping to a £34m full-year loss, claiming it had not been made aware of raising "until immediately prior to its announcement" and would have been willing to underwrite it on better terms.

It also warned it would "not accept another Debenhams situation where a perfectly viable business is run into administration" - referring to the 2019 collapse of the department store chain which wiped out Ashley's £150m investment into the business.

However, it ultimately took part in the raising - buying £3.9m of new shares - a move welcomed by Challice on Sunday.

AJ Bell investment director Russ Mould said Frasers had little chance of winning "given the gigantic obstacle in its path" with Challice's controlling stake meaning Mulberry's hands were tied regarding a takeover.

"Whatever Challice says goes, as its majority stake effectively gives it control of the company. Frasers is also a big shareholder but its 37% stake just isn't big enough to call the shots," he said.

"Challice wasn't swayed by Frasers' original takeover approach, perhaps because it has visions of morphing Mulberry into its own luxury goods interests. Everything now rides on Challice being won over by Frasers' enhanced offer."

"Although generous relative to where the stock has traded this year, the bid is still a fraction of the 300p-plus level at which the shares traded only a few years ago, therefore it is unlikely to cut the mustard with Challice. It's notable that Mulberry's shares have only bounced to 126p on Frasers' revised bid, leaving them well below the actual price on the table. That's the market's way of saying it doesn't believe this is the winning deal."

Reporting by Frank Prenesti for Sharecast.com