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Mike Ashley’s Fraser Group plc is contemplating acquiring Mulberry Group plc, after Fraser Group upped its stake in Mulberry to 36.8%.
Fraser Group has been purchasing shares in the luxury handbag designers since February 2020. The company doubled its stake to 29% last month, sparking speculation that Mulberry would be the latest retailer added to Ashley’s roster. On 19 November 2020, Fraser Group announced that following its latest purchase of Mulberry shares at 150 pence each from Icelandic bank, Kaupthing ehf, it now held a 36.8% interest in the ordinary shares and voting rights of Mulberry.
Usually, a stake of more than 30% would trigger a mandatory offer to be made by the acquiring company for the entire share capital of the target company under the Takeover Code. However, Fraser Group, which owns brands including House of Fraser, Sports Direct, Flannels, and Jack Willis, were exempt from this rule as Challice Ltd, a company owned by Singapore millionaire Christina Ong, already owns 56% of Mulberry’s issued share capital. Despite the exemption, the company has maintained its right to make a voluntary offer for Mulberry.
The retail industry has been hit particularly hard by the pandemic, as stores have been forced to close their doors during lockdown periods. Mulberry has not been immune to this turmoil, with its share price plummeting from 313 pence per share in February, to a low of 126 pence per share at the peak of the pandemic in March. Since the announcement by Fraser Group, Mulberry saw a spike in share price, trading at 245 pence per share in the morning of 20 November. This is the highest its share price has reached since March, although still remains below pre-pandemic levels.
Sports Direct founder Ashley has been on a retail shopping spree over the last few years, which includes the acquisition of House of Fraser in 2018 after it fell into administration. At the time, he outlined his vision of a more upmarket brand, declaring plans to turn House of Fraser into the ‘Harrods of the high street’. Ashley has since purchased clothing chain Flannels, who sell to brands such as Burberry and Fendi, and changed his company’s name from Sports Direct to Fraser Group in 2019. In line with this strategy, Mulberry could make the perfect addition to his line-up. Alongside Mulberry, Fraser Group has also taken a stake in luxury designer Hugo Boss, although this has mostly been in the form of options agreements.
Fraser Group has until 16 December 2020 to confirm whether it intends to make an offer for Mulberry.
For more on this transaction, see our Market Tracker deal analysis tool (a subscription to Lexis®PSL is required).
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