Frasers Group has made a bold move in the luxury market, launching an £83 million takeover bid for Mulberry.
This strategic attempt comes at a critical time as Mulberry faces significant financial challenges.
Frasers Group’s Strategic Move
Frasers Group, known for owning brands like Flannels and House of Fraser, has initiated an £83 million takeover bid for Mulberry. The offer is set at 130p per share, which represents an 11% premium over the closing price on Friday. The executive team at Frasers asserts that they are the ‘best stewards’ to return Mulberry to profitability.
Currently holding a 37% stake in Mulberry, Frasers aims to prevent a recurrence of the ‘Debenhams situation,’ referring to the collapse of the department store chain in 2019 which resulted in a £300 million loss for Frasers. This new bid pits Frasers against Challice, Mulberry’s majority shareholder, controlled by billionaire Ong Beng Seng and his wife, Christina.
Mulberry’s Financial Struggles
Mulberry has recently announced the need for a £10.75 million capital injection, underwritten by Challice, to stabilise its financial position after a challenging year. The company experienced a £34 million pre-tax loss for the year ending March 2024, coupled with a 4% drop in sales to £153 million.
The auditors also highlighted a ‘material uncertainty’ regarding Mulberry’s financial health in their latest report. Such conditions make Frasers’ offer particularly timely, given their intent to steer the company back to steady ground.
Reaction to the Rights Issue
Frasers has openly criticised Mulberry’s lack of engagement with shareholders concerning the recent rights issue. The company described the status quo as ‘untenable’ for minority stakeholders.
Following the announcement of Frasers’ offer, Mulberry’s shares, which had dropped to around 100p on Monday, saw a slight recovery, closing at 124p.
Impact of Market Conditions
The global luxury market has faced challenging conditions recently. Supply chain disruptions and weaker demand in critical markets like China have hit Mulberry hard.
With new CEO Andrea Baldo at the helm since July, Mulberry is focusing on stabilising its operations. Baldo has pledged to enhance operational efficiency and target core UK markets to revive the brand’s fortunes.
However, the financial difficulties have cast a shadow over Mulberry, exacerbating the urgency for strategic intervention.
Potential Changes Under Frasers’ Ownership
Frasers’ potential acquisition of Mulberry marks a significant turning point. While the Ong family has maintained Mulberry’s luxury status since 2003, a shift to Frasers’ ownership could entail a more aggressive expansion into mainstream channels, raising concerns about the brand’s exclusivity.
Mike Ashley’s group is known for its high-profile and assertive business strategies, which could contrast sharply with the Ong family’s discreet approach.
Future Outlook for Mulberry
As Mulberry braces for this potential transition, the upcoming financial results for the third quarter are crucial. The results are expected on October 30, coinciding with the UK government’s budget announcement.
The outcome of this takeover bid is likely to have significant implications for Mulberry’s operational strategy and market positioning moving forward.
Frasers Group’s £83 million bid for Mulberry comes at a pivotal moment, offering potential solutions to the brand’s financial woes.
This takeover attempt underscores the dynamic nature of the luxury market, highlighting the challenges and opportunities faced by established brands today.
