The Mulberry crisis and the tycoons’ battle over its future

Mike Ashley’s retirement from the board at his retail empire Frasers Group was never expected. After all, the man had spent 40 years torturing his rivals on the high street. It was true.

Frasers chairman David Daly sent a request to Chris Roberts at Mulberry (the luxury handbag manufacturer it owns) on November 12, 2022. This was a few days after Ashley left.

Roberts, who served Mulberry for 22 years on its board, denied the request one month later. Mulberry admitted that it needed a new director but argued Ashley wasn’t independent enough.

Since then, the relationship between both companies has only deteriorated and in recent days they have reached a new low.

Mulberry, whose Bayswater bags retail for £1,395 each, slipped out a statement after the stock exchange closed on September 27. It contained all kinds of horrors. Mulberry announced an emergency capital raise of £10 million alongside its heavily delayed results which revealed that sales had fallen by 18% over the last six months.

Frasers, who owns 37.3% of Mulberry, was angry at only being given ten minutes notice and not being allowed to participate in Mulberry’s capital raising. Frasers made a £83 million offer for the company 24 hours later to avoid “another Debenhams scenario” in which a “perfectly viable and profitable business was run into bankruptcy”.

Mulberry rejected the offer immediately and stated that its majority shareholder Challice, an investment vehicle controlled the billionaire Ongs, was not interested in supporting a potential takeover. The Ongs instead are supporting a turnaround led by Andrea Baldo – the former boss at the Danish fashion brand Ganni who was appointed chief executive this summer.

Ong Beng Seng was arrested in Singapore on Friday for a political scandal.

Mulberry is still in a difficult position, despite a severe slowdown on the luxury market. In Mike Ashley, the company has irked an investor who has demonstrated a great capacity for disruption.

Roger Saul was the man behind Mulberry. He began making belts and chokers necklaces in his kitchen in 1971. Saul was inspired to name the company after trees he saw on his way from school.

Emma Hill, the star designer, had the Noughties as the heyday of the Mulberry brand. The company floated in London in 1996. Mulberry’s stock value reached almost £1.5 billion thanks to the popular Alexa bag, named after “it girl” AlexaChung.

Alexa Chung and Mulberry collaborated on a new bag design to celebrate the 50th anniversary of Mulberry.

Mulberry has never been able to reach that same frothy height again. Hill quit in a messy manner in 2013, and Thierry Andréta, who had worked at LVMH, Gucci and other high-profile companies, became chief executive in 2015. Andretta failed in his attempt to move the brand upmarket. The luxury slowdown following the pandemic, and the sudden removal of VAT-free shopping for tourists compounded Andretta’s strategic mistakes.

Despite its struggles the brand remains a key component of Britain’s luxury fashion scene. Mulberry is the UK’s leading manufacturer of leather goods. 600 workers are employed in two Somerset factories to produce the products.

Frasers, which is now run by Ashley’s son-in law Michael Murray, was founded in 2020 after an opportunistic acquisition of 12.5%. Ashley, a man who made his fortune selling cheap sports equipment and oversized coffee mugs, wanted to push his retail group to upscale. He used his stake as leverage to convince Mulberry to provide more handbags for two of his chains, House of Fraser, and Flannels.

Frasers Group, owned by Mike Ashley, has declined to buy Mulberry for 83 million pounds sterling.

Andretta refused Ashley’s advances. He wanted to make Mulberry a luxury brand and so he tried to control the distribution of his products as much as possible. This meant that Frasers preferred the wholesale model, but he wanted to sell through carefully selected department stores concessions.

Source: “All luxury brands were booming during Covid, but Mulberry couldn’t take advantage of this boom as they didn’t possess the distribution needed to do so,” said the source. “Mulberry’s run by the majority shareholders; what they say, is what Mulberry actually does.”

The relationship between the two companies deteriorated last year. Daly again wrote to Roberts in January 2023 to express his disappointment over his refusal to appoint Ashley to the board, citing Ashley’s track record for creating shareholder value within the retail industry. He also expressed his concern about Mulberry’s poor performance. Daly asked for documents related to the commercial agreements between Mulberry, and the Ong Family, which holds a 56 percent stake in Mulberry, as well a copy Mulberry’s most recent set of management accounting and more details about its turnaround plan. In April of last year, executives from both companies met to try and resolve their differences.

Mulberry’s corporate governance standards, listed on London’s less regulated Alternative Investment Market (AIM), appear to be far below the standards expected for a public company.

Cara Delevingne modeled Mulberry bags in 2014. Mulberry’s Board opposed Ashley’s appointment but it appears to be able make room for other people who are, perhaps, even less independently. Roberts has been on the Mulberry board since 2002. He manages the UK branch of the Como Group. This is an international hotel and restaurant group that the Ongs control. Steven Grapstein is a member of the board since 2003 and runs Como’s US business. Melissa Ong is Christina and Ong Beng-Seng’s daughter.

The Ongs’ embarrassment over the Mulberry situation was reduced to a mere blip last week. Ong Beng-Seng, 78, has been charged with aiding and abetting Subramaniam Iswaran’s crimes. Subramaniam Iswaran was sentenced to one year in prison recently for accepting freebies in his position.

During Iswaran’s trial, the prosecution claimed that he received gifts worth over $300,000. Iswaran’s lawyers claimed that they were gifts given by a friend. Ong is seeking legal counsel, as he has not entered into a plea.

Frasers chose to invest £4million in Mulberry shares to avoid a dilution of its stake last week, but it is not guaranteed that Mulberry will have enough money to get through the current tough period. Mulberry posted a loss before tax of £34.1 on sales of £152.8 last year. In March, Mulberry had net debts totaling £16.3 million.

Ong Beng-Seng, whose family controls Mulberry’s majority shareholder is accused of aiding and abetting a disgraced political figure.

Baldo has been busy working on a turnaround strategy that will refocus Mulberry’s attention to the UK, and reduce its aspirations for luxury. Frasers, it is reported, will wait to review the new strategy. Ashley seems to be snookered for the moment. History shows, however, that the Sports Direct tycoon will do anything to avoid losing a large sum of money on a bad deal.

Ashley, who held a 30% stake in Debenhams, orchestrated the vote to remove the chief executive officer and chairman from the board. He also ordered his lawyers bombard the remaining directors. Those efforts failed. Ashley Mulberry will do all he can to prevent a repeat.