Mulberry rejects takeover offer from Mike Ashley’s Frasers Group

Mulberry has rejected an £83 million approach from Mike Ashley’s Frasers Group, setting the scene for a potentially dramatic takeover battle.
The struggling handbag maker believes that the offer “does not recognise the company’s substantial future potential value”. Mulberry said it had consulted 56.1 per cent majority shareholder Challice, controlled by the Singaporean billionaire Ong Seng Beng and his wife Christina Ong, who had expressed “no interest” in supporting the bid.
Frasers, which owns Flannels, Sports Direc, and House of Fraser and has a 36.8 per cent stake in Mulberry, said on Monday that it was making an offer for the rest of the company. At 130p a share, it was at a premium of 11 per cent to the undisturbed closing price.
The leather goods company, based in Bath, founded in 1971 and best known for its Bayswater handbags, has struggled amid the global luxury downturn.
It insisted, however, that the recent appointment of Andrea Baldo as chief executive, as well as an emergency £10.75 million share placing, provided a “solid platform to execute a turnaround” and that it would not accept the bid.
Frasers’ offer came after Mulberry said that it needed to raise cash after falling to a £34 million pre-tax loss in the year to the end of March, from a £13 million profit the previous year. Sales were down 4 per cent to £153 million.
Frasers said it believed it was “the best steward” to return the brand to profitability, adding that it refused to “accept another Debenhams situation where a perfectly viable business is run into administration”.
An offer by Frasers would need the approval of the Ongs. Analysts suggested that Challice could consider buying out Frasers at a premium and taking Mulberry private itself, but that Ashley is not likely to go down without a fight for the business.
Clive Black, of Shore Capital, asked: “Will the proposed offer be a damp squib or something more protracted, heated and harbouring corporate testosterone?”
Mulberry’s shares, which closed at 124p on Monday, rose another 4.8 per cent, or 6p, to 130p on Tuesday afternoon, suggesting that investors expect more to come.
Under City takeover rules, Frasers has a deadline of 5pm on October 28 to announce a firm intention to make an offer for Mulberry, or walk away.