Oh how fast the tables have turned for Boohoo Group PLC (AIM:BOO).
Just last year, the online fashion retailer staged a successful coup against Revolution Beauty plc that led to a comprehensive shake-out of Revolution’s underperforming leadership class.
Boohoo, as a majority shareholder in Revolution, took no prisoners in its sweeping expulsion of the beauty brand’s board members in an attempt to steer the ship back in the right direction.
Unfortunately, that non-violent coup has yet to show any real payoff. Revolution’s shares are still in the pits and recent financial results have been mixed at best.
But that has become the least of Boohoo’s problems in recent weeks.
Barely a year after staging a Revolution revolution, Boohoo’s board is now facing an existential threat of its own.
Gloves come off
Retail heavyweight Mike Ashley, aka the founder and figurehead of Sports Direct owner Frasers Group PLC (LSE:FRAS), has pursued an aggressive campaign to wrest control of Boohoo (of which Frasers owns a 27% stake) by strong-arming a seat for himself and restructuring expert Mike Lennon.
The barbed exchanges are almost too numerous to count at this stage, but it all started in late-October, when Frasers ripped into Boohoo’s “abysmal” trading performance that has caused the “continued value destruction” of the online fashion retailer.
In an open letter, Frasers decried Boohoo’s financial mismanagement and business decisions and called on Boohoo to appoint Ashley as chief executive to set things in order.
Round two of the corporate boxing match kicked off when Boohoo appointed Dan Finley, the former boss of Boohoo’s Debenhams retail chain, to the head of Boohoo’s entire operations.
This was taken as a broadside against Ashley, although Boohoo’s deputy chairman Alistair McGeorge stated that the decision to hire Finely was “unanimous”.
Frasers did not take this sitting down.
Round Two
A second (and not last) open letter from Frasers in early-November stated: “We continue to believe strongly in the potential of the Boohoo business and the quality of its brands.
“However, the directors have pushed Boohoo into a terrible refinancing, while refusing to engage properly with Frasers on it.
“They have then rushed out a CEO appointment to try to block the say of shareholders. This has to stop. What will they try next? Desperate people do desperate things.”
Boohoo shot back, calling Ashley “conflicted” and acting in his own self-interest.
The saga seemed to be moving in Boohoo’s direction when proxy advisor Institutional Shareholder Services (ISS) recommended that investors oppose Frasers’ move.
Just last week, another proxy advisor, Glass Lewis, also opposed Frasers’ advances.
Perhaps reading the writing on the wall, Frasers offered up a few concessions in an attempt to get an agreement over the line, but the tone was hardly conciliatory.
“We are doing this despite the fact that Boohoo has grossly exaggerated any perceived conflicts and governance concerns as a thinly-veiled excuse not to appoint Mr Ashley and Mr Lennon as directors of Boohoo,” said Frasers.
“In Frasers’ view, what this boils down to is that Mahmud Kamani, Boohoo’s executive vice chair, does not want Mr Ashley or Mr Lennon appointed, as he fears this would dilute his influence over the board,” the group added.
That brought us to last Friday, when Boohoo read these concessions, ripped them up, and threw them in the bin.
Ashley will not join the board “in any circumstances”, said Boohoo as it put its foot down so hard reverberations were felt across the City.
Boohoo reiterated “irreconcilable conflicts of interest” in appointing Ashley and Lennon to its board, “given their embedded relationship with Frasers”.
While the proxy advisers have made their views clear, what is less clear is what the sentiment is among Boohoo’s wider shareholder base.
The likes of Schroder Investment Management and Camelot Capital Partners feature prominently on Boohoo’s shareholder register, while Boohoo co-founder Mahmud Kamani is the second-largest shareholder (behind Frasers) with a 12.5% stake.
How will the cookie crumble? Thankfully we don’t have to wait too long to find out.
At a general meeting scheduled for today (Friday, 20 December), Boohoo shareholders will be given the opportunity to vote on Frasers’ proposals to appoint Ashley and Lennon to influential board positions.
It oughta be exciting.