Mulberry Rejects Frasers Group's £83m Takeover Bid, Citing Undervaluation

Mulberry, the renowned British luxury handbag maker, has declined an £83m takeover bid from Frasers Group, owned by Mike Ashley. The company, founded in 1971 in Somerset, England, stated that the offer fails to recognize its "substantial future potential value."

Ong Beng Seng, the Singapore-based billionaire hotelier, and his wife Christina hold a controlling 56% stake in Mulberry through their holding company Challice. The company informed shareholders that Ong "has no interest in supporting the possible offer."

Instead, Mulberry will proceed with its recently announced plan to raise almost £11m from shareholders. This decision comes as the luxury brand faces challenges in the broader luxury market and a decline in UK sales, partly attributed to the abolition of VAT-free shopping for overseas tourists by Rishi Sunak.

Mulberry, known for its signature Bayswater bag introduced in 2003, has invited Frasers Group to participate in the fundraising process. The company stated, "Recognising that Frasers is a committed and important investor in Mulberry, and has publicly stated that it would have been willing to underwrite the subscription, the board looks forward to engaging further with Frasers regarding a pro rata participation in the subscription."

Frasers Group, which owns 37% of Mulberry's stock and is the second-largest shareholder, expressed concerns about the fundraising approach. The retail group, which also has interests in other luxury brands like Hugo Boss, criticized Mulberry's decision, stating it would not "accept another Debenhams situation where a perfectly viable business is run into administration."

This statement refers to Mike Ashley's previous experience with Debenhams, where his £180m stake became worthless after the chain's bankruptcy. The incident highlights the complex dynamics in the luxury retail sector, where Mulberry has been facing competition from other high-end brands like Burberry and Coach.

Mulberry has been adapting to market changes by diversifying its product range, investing in digital transformation, and focusing on sustainability and ethical production. The company holds a Royal Warrant from King Charles III, underscoring its British heritage and craftsmanship.

As Mulberry navigates these challenges, it continues to leverage its strong presence in the UK luxury market and international expansion efforts. The brand has collaborated with celebrities and designers for special collections and participated in various fashion week events to maintain its relevance in the industry.

Frasers Group now has until 5 pm on October 28, 2024, to either make another takeover bid or withdraw its interest. This deadline sets the stage for potential further developments in this high-stakes luxury retail drama.

"The board has been informed that Challice is supportive of the company's strategy and has no interest in supporting the possible offer. As a result of the above, the board has rejected the possible offer."

As Mulberry continues to focus on its leather craftsmanship and quality, the outcome of this situation will likely have significant implications for the brand's future in the competitive luxury goods market.