Mike Ashley’s bid for Mulberry creates rift with Mulberry’s main shareholder

Mulberry has seen tensions escalate as the two largest shareholders of the British luxury brand clash over its future ownership. The board of Mulberry said Monday it would be open to an improved bid from Frasers despite Challice’s attempts over the weekend.

The shares of the luxury goods retailer rose by 13p or 11.5 percent to close at 1251/2p. Its board announced that it would “work with advisers to review the company’s situation and make a further announcement when appropriate”. The dispute has raised new questions about the direction of the company and possible changes in control.

Challice has called for Mike Ashley’s Frasers Group, which controls 56,1 per cent of the company and is owned by billionaire Ong Beng Seng from Singapore and his wife Christina Ong to drop its interest in a takeover. The company said that on Sunday it “had no interest” in selling to Frasers its holding and that the advances made were an unwanted “distraction”.

Frasers Group – which owns Sports Direct, House of Fraser, and Mulberry – raised its offer on Friday to 150p per Mulberry share, after its initial takeover attempt was rejected.

Mulberry’s board of directors has a fiduciary obligation to take into account all options when it tries to turn the brand around. The board can recommend an offer, but it would require the approval of all shareholders including Challice. After the board announced that it would be reviewing its position, shares of the brand rose sharply.

Challice confirmed Sunday that they had no intention to accept an offer. They added that this was “an inopportune moment for Mulberry’s sale and [it] regrets particularly the distraction the potential offer brings to the company at this time”. Analysts, however, have suggested that Ashley would likely fight for the company.

Frasers is well-known for its acquisitiveness, and willingness to engage in boardroom battles with rivals to gain control of companies. It has had notable battles in the past with rivals like Debenhams or House of Fraser.

The group made several takeover attempts and financial rescue efforts in the case of Debenhams where it held a 30 percent stake. The group, which was then known as Sports Direct and held a substantial stake in the retailer Debenhams, still faced opposition from Debenhams creditors and institutional shareholders despite its significant stake. Instead, they preferred a restructuring that excluded Sports Direct’s influence.

Mike Ashley’s Frasers Group – which owns 36.8% of Mulberry – raised its offer on Friday to 150p per Mulberry share.Debenhams creditors took over the company in a prepack administration and effectively wiped out Sports Direct stake.

Analysts stated that Frasers would only be able to overcome the opposition against its Mulberry strategy by offering a high price that shareholders couldn’t refuse.

According to a source familiar with the situation, Ashley knew that Mulberry had a majority stake when he purchased it. He cannot therefore assume that they will change their stance on his request. It will be interesting to see what happens next, as Mulberry must consider the bid.

Frasers must announce its firm intent to make a bid or to walk away by 5pm on the 28th of October, according to City takeover regulations.

Frasers took over Mulberry after Mulberry announced it needed cash. The brand suffered a £34million pre-tax loss for the year ending March, down from a £13million profit in the previous year. Sales were also down 4% to £153million.

The Bath leather goods company founded in 1971, and best known for their Bayswater handbags has stated that Andrea Baldo’s appointment as chief executive, in July, along with an emergency £10.75million share placement, provided “a solid platform to execute a turn-around”.