Sports Direct-owner Frasers Group PLC (LSE:FRAS) has tabled an offer to acquire the 63% of shares it doesn’t currently own in Mulberry Group PLC (AIM:MUL) to stave off what it sees as a potential “Debenhams situation”.
The offer at 130p per share puts an £83 million valuation on Mulberry, or around £52.4 million for the piece of Mulberry that Frasers does not currently own.
On Friday, Mulberry announced an agreed £10 million equity investment from its largest shareholder, Singapore-based Challice Ltd, which was announced alongside a discounted £750,000 capital-raising exercise.
Frasers expressed surprise and frustration about the proposed Challice subscription, citing Mulberry’s “total lack of engagement” throughout the process, calling it “an untenable position for Frasers and the other minority holders of Mulberry shares”.
The subscription would have a dilutive effect on Frasers' stake in the business, it was noted.
Frasers said its takeover offer would result in both the Challice subscription and retail offer being cancelled.
“With our leading retail expertise and presence, and best in class distribution capability, we believe Frasers to be the best steward for returning Mulberry to profitability,” Frasers said.
“As a standalone business, (Mulberry) is facing unabating difficulties. To name a few, rising costs, macroeconomic headwinds, and increased selectivity from its discretionary customer base.
“Frasers are exceptionally concerned by the audit opinion in the latest annual report released on Friday, 27 September 2024, which notes a ‘material uncertainty related to going concern’.
“As a 37% shareholder, Frasers will not accept another Debenhams situation where a perfectly viable business is run into administration.”
Debenhams, a major British department store chain, went into liquidation in 2020 after more than 240 years of operation, after private equity owners Silver Point Capital could not agree on a price with JD Sports nor Ashley's Frasers.
Frasers bought up the choicest parts of the store estate from the administrators.