Blow for Frasers’ takeover bid as Mulberry’s biggest investor refuses to sell

Mulberry is consulting advisers on Frasers Group’s latest takeover proposal after its largest shareholder rejected the £111m offer.

Challice Limited, which owns a 56 percent stake in Mulberry, said on Sunday it had “no interest” in selling its shares in the luxury fashion brand to Frasers.

The Singapore-based conglomerate, owned by billionaire Ong Beng Seng and his wife Christina Ong, said it was “an inopportune time to sell Mulberry.”

Frasers originally made an £83 million bid for Mulberry on September 30, saying the handbag maker had faced “continued difficulties” including higher costs, economic headwinds and “increased selectivity” of its customer base.

In its latest annual results for the year ending March, Mulberry sales fell 4 percent due to weaker trading in Britain and lower visitor numbers in China and South Korea.

As a result, the London-listed company fell to a pre-tax loss of £34.1 million, with a further impact from an £8.6 million impairment charge on stores.

Mulberry further revealed that sales had fallen 18 percent in the first 25 weeks since the end of the period amid continued global economic pressure.

Yet the company turned down Frasers’ offer, saying the recent appointment of CEO Andrea Baldo and the £10.8 million fundraising plan provided the company with a ‘solid platform’ to deliver a turnaround and deliver ‘best value’ for to offer to investors.

Mike Ashley’s retail empire then marginally increased its stake in Mulberry from 36.9 per cent to 37.3 per cent, having acquired £4m worth of shares before coming up with its latest £111m takeover deal.

The new proposal represents a 28 percent premium to Mulberry’s closing price on September 27, before the start of the current offering period.

Frasers told shareholders on Friday that it “strongly believes it can provide the right insulation and investment to support a much-loved British brand.”

Following this announcement and consultation with Challice, Mulberry said it was ‘working with advisors to consider the company’s position and will make a further announcement in due course’.

It added: ‘The board emphasizes that there can be no assurance that an offer will be made for the company, nor the terms on which such an offer might be made.’

Mulberry shares responded positively to Frasers’ upgraded proposal, rising 18.2 per cent to 130 cents on Monday morning.

Based in Shirebrook, Derbyshire, Frasers Group owns several well-known clothing and sports brands, including Sports Direct, Lonsdale, Slazenger, Jack Willis and Evans Cycles.

The FTSE 100 businesses have gradually increased their investments in luxury brands amid subdued global consumer spending on luxury goods.

Over the summer, Frasers bought THG’s luxury goods websites such as Coggles as part of a multi-year partnership and last week increased its stake in German fashion retailer Hugo Boss to around 16.4 percent.

But despite increasing its bid for Mulberry, Russ Mould, investment director at AJ Bell, said: ‘Frasers has little chance of winning the bid for Mulberry given the massive obstacle in his path.’

He noted that the 150 pence per share offer represents half of what Mulberry was trading for a few years ago, so “Challice is unlikely to cut the mustard.”