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Highlights:
- Frasers Sweetens Bid: Frasers increased its offer to 150p per share, valuing Mulberry at £111 million.
- Challice Stands Firm: Majority shareholder Challice, with a 56.4% stake, refuses to sell, blocking Frasers’ takeover attempt.
- Market Skepticism: Despite the increased bid, Mulberry’s share price remains below the offer, reflecting doubts over the deal’s success.
Luxury handbag maker Mulberry (LSE:MUL) finds itself at a crossroads as it weighs a £111 million bid from retail giant Frasers (FRAS), which has been aggressively expanding its presence in the luxury market. However, the bid faces a significant obstacle in the form of Challice, Mulberry’s largest shareholder, which holds a controlling 56.4% stake. Challice has firmly stated that it has "no interest" in selling its shares to Frasers, a move that all but blocks the possibility of a takeover by the Mike Ashley-controlled conglomerate.
Shareholder Stalemate
On the back of Frasers’ latest sweetened offer of 150p per share, Mulberry’s shares rallied 16%, reaching 130p. However, despite this jump, the share price still remains below Frasers’ revised offer, signaling that the market is skeptical about the bid’s success.
Frasers, which owns a 37.3% stake in Mulberry, initially proposed a bid of £83 million, or 130p per share, but this was rejected by Mulberry’s board, citing valuation concerns. The increased bid of 150p per share, while higher, faces resistance from Challice, a Singapore-based company controlled by billionaire Ong Beng Seng.
Challice has consistently expressed its confidence in Mulberry’s turnaround strategy under new CEO Andrea Baldo and has made it clear that it will not support Frasers’ takeover bid. In a statement on 13 October, Challice not only praised Frasers for participating in Mulberry’s recent fundraising round, in which Frasers purchased £3.9 million worth of new shares, but also reiterated its belief in Mulberry’s long-term value despite its recent financial struggles.
Challice Holds the Key
The impasse between Frasers and Challice underscores the deep divisions between Mulberry’s two major shareholders regarding the brand’s future. Challice’s backing of Baldo’s turnaround plan and its firm refusal to sell its stake essentially puts Mulberry’s fate in its hands. As investment director Russ Mould from AJ Bell pointed out, “Whatever Challice says goes, as its majority stake effectively gives it control of the company.”
Frasers has until 28 October to make a firm offer or walk away, according to UK takeover rules. However, with Challice standing firm, it appears increasingly unlikely that Frasers’ bid will succeed unless it can significantly alter Challice’s stance.
Expert Outlook
Mould further explained that Challice’s resistance may stem from its own ambitions for Mulberry within its broader luxury goods portfolio. He noted that while Frasers’ offer of 150p per share is generous in the context of Mulberry’s recent stock performance, it pales in comparison to the 300p-plus levels the shares traded at just a few years ago. As such, it may not be enough to convince Challice to part with its controlling stake.
With the deadline for a firm offer looming, all eyes are on whether Challice will be swayed or if Frasers will ultimately have to walk away from its ambition to take over Mulberry.
