What: Mulberry rejects Frasers Group's £83 million bid, citing undervaluation of the brand's future potential.

Why it is important: This rejection highlights the tension between established luxury brands and aggressive retail conglomerates, showcasing the complex dynamics of brand valuation and long-term growth strategies in the evolving luxury market.

Mulberry, the renowned British luxury handbag maker, has rejected a conditional bid from Mike Ashley's Frasers Group, stating that the offer of 130p per share, valuing the company at £83 million, fails to recognize its "substantial future potential value". This bid represented an 11% premium over Mulberry's closing price on the previous Friday. The rejection is supported by the Ong family, Mulberry's long-term majority shareholder holding a 56% stake.

Mulberry's board, along with its new CEO Andrea Baldo appointed in July, believes in the company's ability to turn itself around. The company is currently raising almost £11 million from existing shareholders to strengthen its balance sheet and create a solid platform for recovery.

Frasers Group, which already owns about 36.8% of Mulberry's shares, claimed it was blindsided by the rights offer announced after market close on Friday. Frasers expressed its willingness to potentially fund the cash raise on better terms and believes it is "the best steward" to return Mulberry to profitability.

The luxury brand recently reported an annual pre-tax loss of £34 million, compared to a £13 million profit the previous year, with revenue dropping 4% to £153 million.

IADS Notes: Frasers Group's bid for Mulberry is part of its broader strategy to expand in the luxury retail sector. The group has been on an aggressive acquisition spree, recently acquiring or showing interest in various retailers like Matches, John Anthony, and Ted Baker. This aligns with Frasers' aim to reposition itself as a premium fashion giant. However, the luxury retail sector, particularly in e-commerce, faces challenges with brands focusing on direct-to-consumer sales and a slowdown in key markets like China. Mulberry's rejection of the bid reflects the complex landscape of brand valuation and growth strategies in the evolving luxury market, where established brands are cautious about consolidation attempts by retail conglomerates.

Mulberry rejects £83mn takeover bid from Mike Ashley’s Frasers