Frasers Group has ramped up its campaign against Boohoo’s senior management, claiming the current team had created “a catastrophic mess”.
The retail giant – which holds 27% of Boohoo – demanded at the end of last month that Mike Ashley takeover as chair, alongside restructuring expert Mike Lennon as director, to turnaround the loss-making fashion group and put an end to what it described as “dismal results, lack of transparency, terrible refinancing, and further supply chain allegations”.
This morning, Boohoo called on shareholders to reject Ashley’s proposals, backed by proxy adviser Institutional Shareholder Services (ISS), which criticised Frasers’ involvement and flagged potential conflicts of interest. ISS stated that Frasers had presented no specific plans for change, labelling Ashley’s criticisms of Boohoo’s performance as “superficial.”
It is the latest in the back and forth between the pair, which have spent the last six weeks in a public battle as Frasers seeks to oust its leadership team and install its own representatives at the helm.
And it looks at though Frasers’ bid to take control could be undermined by its own sliding sales, the group cut its profit outlook for the year last week to £550m-£600m after a 33% drop in pre-tax profit to £207.2m and an 8% fall in sales in the first half.
Ashley’s bid for the top position has been slammed by Boohoo, which accused Frasers of using its stake in the fashion brand and other retailers to promote its own “commercial self-interest”.
The next front in Frasers’ attempted Boohoo coup will come later this month, when shareholders of the fast fashion etailer will vote on Ashley’s bid for a seat on the board.
In a separate and bizarre twist, police have been called in to investigate claims of stalking and “corporate espionage” made by several Boohoo Group executives – although the identity of the alleged perpetrators and those who commissioned them is unknown.
As financial and corporate tension flare across multiple fronts, how successful will Frasers be in its push for influence at Boohoo – and what exactly will Ashley do if he successfully gains control?
What’s happened so far?
Ashley, who owns a controlling stake in Frasers Group, has been campaigning for more influence at Boohoo as the fast fashion etailer to rack up steep losses.
The latest half-year results for Boohoo show its pre-tax losses tripled from £36.6m to £147.3m in the six months to end of August, as sales dropped 15% to £620m.
The retailer has faced a tough time with its shareholders as of late, with many investors urging the board to restructure the business in September and consider spinning off some of its top-performing brands in a bid to boost its flagging share price, which has fallen by over 85% in the last five years.
Tensions between the two groups reached boiling point when Frasers Group demanded that Boohoo appoint Ashley as its chief executive last month following the depature of former CEO John Lyttle. In an open letter to its board, Frasers presented the proposed appointment of Ashley as the etailer’s new CEO as the “solution to Boohoo’s leadership crisis”.
Fraser also publicly lashed out at the retailer’s recent £222m debt refinancing deal announced in October, describing it as “wholly unsatisfactory” and a “step backward for the company”.
Boohoo hit back, describing Frasers’ characterisation of its debt refinancing as “inaccurate and unfair”. It later announced the appointment of Debenhams boss Dan Finley as its new chief executive.
Frasers, who slammed Finley’s appointment as “desperate”, have since urged Boohoo’s shareholders to vote to appoint Ashley and restructuring expert Mike Lennon as directors at the upcoming shareholder meeting on December 20.
In an open letter to Boohoo shareholders, Frasers urged co-founder Mahmud Kamani to “step down” and be replaced by Ashley and Lennon, saying shareholders faced “a simple choice: win with Mike Ashley or lose with Mahmud Kamani”.
In response, Boohoo announced Kamani would no longer serve as chairman, with non-executive director Tim Morris stepping into the role. Though Kamani remains involved in the business in an executive capacity, he has moved to vice-chair.
Kamani retains 12.8% of Boohoo’s shares, while family and friends hold an additional 11%.
Boohoo explained: “The board has decided to divide the role between Mahmud Kamani’s executive capacity and his role as the board’s chair, to enable the company to have an independent chair while allowing Mahmud to continue in his day-to-day executive role.”
Frasers’ vision for Boohoo
Frasers’ open letter not only championed Ashley’s leadership but also outlined a plan for the future of Boohoo under his proposed leadership.
The letter highlighted the group’s track record of returning £800m to shareholders over the last five years and detailed how Ashley and Lennon would “push for total transparency” at Boohoo.
The letter stated: “For too long, the current board has failed to disclose to the market and to shareholders what is really happening at Boohoo.”
It also called for a review of Boohoo’s financing arrangements to better understand the terms of its refinancing and explore ways to improve its financial position.
Additionally, they stressed the importance of “a return to a winning mentality” at Boohoo – a point which Frasers CFO Chris Wootton re-emphasized to Retail Gazette today.
“We want to see Boohoo realise its potential and at the moment, we feel it’s not,” says Wootton.
“We’ve invested a lot of money in that business, we see great partnership potential, we’ve been a supportive shell for a very long time, but we feel there’s some significant areas of improvement that need to be made.”
Despite these challenges, Frasers remains confident in Boohoo’s promise – but believes a change at the top is necessary to unlock that potential.
However, Boohoo has previously flagged Frasers’ stake in rival Asos as “important facts that need to be taken into account and carefully considered by the board” on any decision involving Ashley to the board.
Boohoo stated that Frasers, which holds a 23.6% stake in Asos, has a “wholly inappropriate” interest in leveraging its stake in Boohoo to promote its own commercial interests, including its credit offer Frasers Plus, at the expense of other shareholders.
Boohoo is not alone in this thinking – as retail analyst Nick Bubb speculates that Ashley could “try and use his leverage to push for a Boohoo/ASOS merger”.
Could Ashley push through with his proposal?
The big question is whether Boohoo shareholders will vote in favour of Ashley’s proposal. Recruitment specialist and managing director of Detail Business Consulting, Paul Meechan, doesn’t think it’s likely.
“I’d be very surprised if they did. I cannot see an upside,” he says, adding that if Ashley truly wanted a role at Boohoo, he should buy a majority 51% stake in the business. “Otherwise, he should just shut up.”
Meechan questioned Frasers’ strategy, particularly around its Flannels brand, and the expansion of luxury retail products.
“Luxury products are luxury products. That doesn’t mean they are on every high street,” he remarked.
He also criticised Frasers’ approach to flagship stores, adding: “For all this talk of opening flagship stores, you don’t need two, you don’t need five, you need one. The more you expand, the less ‘flagship’ it becomes.”
Despite these reservations, Meechan believes Ashley will continue to “chuck his weight around” at Boohoo, noting that if he did manage to get his foot in the door, he would “get exceptional value” for his 27% stake.
A familiar playbook: comparing past acquisitions
As Frasers Group pushes for influence over at Boohoo, it’s worth considering Mike Ashley’s track record with previous acquisitions, such as House of Fraser and most recently, its failed takeover attempt of Mulberry.
Known for his hands-on approach to restructuring, Ashley has a history of reducing competition and breaking up businesses to extract value. With Boohoo’s future on the line, this pattern may offer a glimpse into what could happen if Ashley gains control.
In the case of House of Fraser, Ashley famously acquired the beloved department store chain with the aim of consolidating the retail market and later selling off its assets in 2018. The acquisitive retail tycoon has amassed a sizeable fashion empire over the years alongside Frasers including Flannels, Jack Wills, Agent Provocateur and I Saw It First. Similarly, his attempt to acquire luxury retailer Mulberry in October raised questions about his intentions for the brand and its future direction.
However, Ashley hit a road block when Mulberry’s largest shareholder Challice stated that it had “no interest” in selling its shares to Frasers.
Despite this setback, Ashley clearly has form for acquiring controlling stakes of other retailers. So whether goal is to turn the business around or to restructure it for sale, the possibility of breaking up Boohoo’s brands or using its assets to reduce competition could become a reality.
If Boohoo’s board agrees to Ashley’s proposal, it may signal the start of a new chapter for the fast fashion giant—one that could closely mirror Ashley’s previous corporate manoeuvrings, where he seeks to maximise value through tough calls and restructuring efforts.
With Boohoo’s financial troubles going nowhere anytime soon and Frasers pushing hard for board influence, all eyes will be on how shareholders vote later on this month.
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