Frasers Group pulls out of potential full takeover of Mulberry despite buying over a third of the business this year
- The Takeover Panel insisted that it make a solid offer by Dec 17 or withdraw
- Mulberry has been badly affected by Covid-19’s negative effect on tourism
- Frasers Group has expressed interest in buying Debenhams and Topshop
Mike Ashley’s Frasers Group has decided against making an offer for luxury fashion retailer Mulberry.
The Sports Direct owner has been gradually building its stake in the handbag maker since February to become its second-largest investor behind the Singapore-based investment vehicle Challice, which holds a majority share.
It first bought into the business in February when it acquired a 12.5 per cent share for an estimated £19million following Mike Ashley’s desire to expand his retail empire into upmarket products.
Since February, Frasers Group has been gradually building its stake in the handbag maker to become its second-largest investor behind the Singapore-based investment vehicle Challice
Over four million shares owned by Icelandic bank Kaupthing was then bought in November, taking the group’s stake to 36.8 per cent. It subsequently considered making a takeover approach although it said it was not formally obligated to under city rules.
However, the Takeover Panel insisted that it make a solid offer by December 17 or stand down. The company’s announcement of its withdrawal caused the value of Mulberry’s shares to drop £15million yesterday.
In a statement, its chairman Godfrey Davis wrote: ‘We continue to make significant progress in building Mulberry as a sustainable global luxury brand, creating value for all our stakeholders.
Frasers Group boss Mike Ashley has been expanding his retail empire in recent years
‘This is focused around our omni-channel network and market-leading digital platform; increasing our Asian footprint; and a relentless focus on innovation and sustainability, offering our customers beautiful products, made to last in our Somerset factories.’
Mulberry has been badly affected by the pandemic causing international tourist numbers to plunge, lockdown restrictions, and the rise of working from home caused many of its flagship stores to shut temporarily.
Even before Covid-19 though, the group was experiencing poor domestic trade that it blamed on Brexit-related uncertainty, falling consumer confidence, and a ‘difficult’ sales environment.
Mulberry has been badly affected by the pandemic causing international tourist numbers to plunge, lockdown restrictions, and the rise of working from home
Three weeks ago, it revealed revenues dropped by 29 per cent to £48.9million in the six months to September 26 despite a surge in online purchases from its Asian market.
Cost-cutting measures did enable the firm to slash its losses by over 75 per cent to £2.1million although it was forced to make a quarter of its 1,500 employees redundant.
It also warned that the pandemic would likely damage business ‘for at least’ the rest of the current financial year even with the recent positive news about the development of coronavirus vaccines.
Frasers Group has expressed interest in purchasing department store chain Debenhams
Shares in the Somerset-based firm have fallen by 29 per cent this year and by 1 per cent to £2.02 this morning.
Frasers Group’s shares have risen modestly by contrast as it has recorded impressive results while other apparel and sports retailers such as Primark, Burberry and Go Outdoors have struggled.
On Thursday last week, it disclosed half-year results showing profits rising 17.6 per cent to £106.1million, which it put down to the reopening of stores after the first lockdown in spring.
It bought DW Sports for £37million after the fitness chain entered administration, and has expressed interest in buying Debenhams and the Arcadia Group subsidiary Topshop after those retailers suffered similar fates.