Frasers Group, the largest shareholder of Boohoo with c.27% of the issued share capital, has written an open letter to Boohoo suggesting Mike Ashley for its vacant leadership position.
The conglomerate expressed strong confidence in Boohoo’s potential and reiterated its commitment to "maximising value for the benefit of all shareholders and other stakeholders."
However, Frasers Group emphasised the urgent need for new leadership following the resignation of CEO John Lyttle. Boohoo recently announced a ￡222m ($290m) debt financing agreement and a strategic business review, but Frasers pointed out the "leadership void" left by Lyttle’s departure as a major obstacle to the brand’s recovery.
Frasers' reasoning for Ashley's takeover of the leadership
Frasers argued that Boohoo's board has "lost its ability" to manage the business and investment in recent years, with revenue declining by 36.5% between August 2021 and August 2024.
Frasers expects the brand’s upcoming half-year results to show a sixth consecutive drop in gross profit, following what it called an "abysmal" market performance and a failure to deliver on promised ￡125m in cost savings.
"The impending ￡125m of cost savings that were first announced to the market in October 2023 appear to have been eroded by abysmal go-to-market performance. Boohoo's announcement on Friday 18 October 2024 (the Business Update) failed to reference any cost savings at all," it said.
The conglomerate also criticised Boohoo’s recent debt refinancing as "wholly unsatisfactory" and a step backwards for the brand, contributing to a significant drop in its share price, which has fallen by 29% year-to-date and 17% in the past three months.
Frasers Group further warned Boohoo that given the refinancing and near-term repayment deadline, no disposals should be made without first consulting the conglomerate and all other major shareholders.
Continued pleas for board representation
Frasers Group has repeatedly called for representation on Boohoo’s board but expressed frustration at the lack of meaningful engagement. In a recent letter, it requested an in-person meeting with executive chairman Mahmud Kamani to discuss leadership effectiveness and board appointments, which it says were ignored.
After several ignored pleas, Frasers has made it clear that it will no longer tolerate the "delay and ignore" tactics by the Board in the context of what it called the "continued value destruction" of Boohoo.
Frasers emphasised that the new leadership at Boohoo should be able to deliver best-in-class operational oversight and reinvigorate the company, deeming Ashley as a director and CEO to be the best solution for this leadership crisis.
Next steps
To address Boohoo’s leadership crisis, Frasers is now requisitioning a general meeting of shareholders to appoint Ashley as CEO and director, remove John Lyttle from the board, and appoint Mike Lennon as a new director.
"It is critical for Boohoo's future success that shareholders urgently be given the opportunity to appoint to the Board experienced individuals capable of delivering the necessary changes to deliver long-term value for all shareholders," concluded Frasers Group.
Boohoo Group declined Just Style's request for comment but highlighted its receipt of the requisition notice, which was published on 24 October: "The Requisitions propose to appoint Mike Ashley and Mike Lennon as directors of the Company and to remove John Lyttle as a director of the Company. They also propose to appoint Mike Ashley as Chief Executive Officer, should he be appointed as a director.
"The Boohoo Board is in the process of reviewing the content and validity of the Requisitions with its advisers. A further announcement will be made in due course."
Frasers Group's pitch to lead Boohoo follows recent speculation claiming that Boohoo intends to break up some of its core brands after it announced plans to conduct a strategic review.
Withdrawal of the latest Mulberry bid
Frasers Group's focus on Boohoo follows the company's withdrawal of its bid to acquire the British luxury handbag and accessories brand Mulberry, of which it is also a shareholder.
Its withdrawal came after Mulberry's board and main shareholder Challice rejected its previous buyout offers. An industry expert told Just Style at the time that Mulberry's resistance to the proposal was due to Frasers' "lack of experience" in the luxury sector.
In its latest statement, Frasers expressed "increasing concern" over Mulberry's governance, lack of a commercial plan amidst growing market headwinds, and the brand’s current financial difficulties.
After reviewing Mulberry's response and facing limited engagement from the board on its offer, Frasers decided to end the offer period. The company aims to pursue broader discussions with both Mulberry and Challice, including topics raised during the acquisition attempt.
Frasers said: "Whilst the response announcement is a disappointing outcome, Frasers remains a long-term supporter of the well-loved British brand, Mulberry. Frasers continues to believe that market headwinds, and a clear lack of commercial plan, place the company in a very difficult financial position. Frasers welcomes the presentation of a credible plan in the near term."
The conglomerate now hopes the board will soon present a credible plan and engage positively on the appointment of a Frasers representative to Mulberry’s board, a request Frasers has made several times.
Frasers confirmed it does not intend to proceed with an offer for Mulberry under Rule 2.7 of the Code and will adhere to the restrictions outlined in Rule 2.8.
Mulberry had not responded to Just Style's request for comment at the time of going to press.
Frasers Group said it would not be commenting on Mulberry and had not responded to Just Style's request for comment at the time of going to press on its pitch for Boohoo's vacant leadership positions.
"Frasers Group eyes Boohoo leadership after dropping Mulberry bid" was originally created and published by Just Style, a GlobalData owned brand.
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