Boohoo shareholders deny Frasers’ board pursuit: Is the end in sight for the boardroom battle?

Shareholders of Boohoo Group have voted against the appointment of Frasers Group founder Mike Ashley and its proposed director, Mike Lennon, to the fast fashion giant’s board of directors. The decision was made during a general meeting requisitioned by Frasers, which had carried out a campaign to gain representation amid declining sales at Boohoo.

Tensions were already high going into the meeting. Prior to its start, reports began circulating that journalists had been banned from attending, with space believed to be solely reserved for shareholders. Around 64 percent of shareholders voted against both Ashley and Lennon’s appointment, with 36 percent voting for the proposals. Just over 81 percent of shareholders participated in both votes.

Upon releasing the results, newly appointed non-executive chair of Boohoo, Tim Morris, thanked shareholders in a regulatory filing, stating that the company remained focused on the delivery of its ongoing Business Review. Boohoo CEO, Dan Finley, meanwhile, said that since his appointment, he had “hit the ground running” and was “super energised to realise the significant opportunities” for the business. His statement continued: “I continue to believe this group is materially undervalued. Our most important work is ahead of us, and we will drive value for all shareholders."

It brings to an end this chapter of what has been a long-winded back-and-forth between the two companies. Publicly, Frasers first aired frustrations over Boohoo’s strategy back in October, however, if accounts from each party are accurate, tensions had been rising long before the media and investors knew of what was unfolding. Yet, it was just in the last few months that the Sports Direct-owner had been applying increased pressure on Boohoo and its shareholders to upend management in favour of Murray as the new head. Any attempts to do so had been denied by Boohoo, however, leading to Frasers' requisitioning this general meeting, and thus badgering the fast fashion giant to again cater to its whims.

Boohoo did later cave, yet only slightly, agreeing to allow Frasers one board seat in exchange for certain commitments–namely, promises that it would not pursue any subsidiaries it decided to sell and to keep any commercial interests associated with competitors Frasers holds stakes in out of decision-making. Frasers said it would comply, but only with the governance protocols that were “market-standard”.

A pattern of pressure in the face of financial downfalls

This is not unusual behaviour of Frasers. The company has already been known to pressure the boards of companies it holds stakes in the face of financial challenges. Accounts of such have already taken precedence this year even, and have been as recent as October, when Frasers made a bid for Mulberry, a brand it had, at the time, held a 36.9 percent stake in.

The Proposed Offer came as a response to some lacklustre financials posted by Mulberry for the fiscal year 2024, when it had swung into a loss and shared concerns over material uncertainty. Mulberry ultimately launched a capital raise with the mission of securing 10 million pounds, the proceeds of which were to be used to strengthen the group’s balance sheet and provide financial flexibility. This, however, was dubbed “wholly unsatisfactory” by Frasers, which said that while it had been supportive of the brand in the past, it believed it was the “best steward for returning Mulberry to profitability”.

With this, Frasers came forward with a takeover bid amounting to 83 million pounds for Mulberry’s entire issued share capital, stating that it would “not accept another Debenhams situation where a perfectly viable business is run into administration”. In this statement, Frasers was referencing an instance in 2020 when Debenhams, a retailer it formerly held a 180 million pound stake in, filed for bankruptcy, leaving its shares worthless. What ensued was a legal battle in which Mike Ashley accused FRP Advisory of “stifling investigation into the affairs” of the retailer.

In the case of Mulberry, however, the premium brand retained faith in its own dealings, rejecting Frasers’ offer just one day after it was issued. In its response, which it issued following consultation with 56.1 percent shareholder Challice Limited, it said the offer did not recognise its future potential value. Mulberry thus doubled down on its intention to raise capital, claiming that the strategy would provide “a solid platform to execute a turnaround”.

Frasers then decided to raise its stake in AIM-listed Mulberry to 37.3 percent, however, later reversed its pursuit of a takeover after tensions grew between the retail conglomerate and the Mulberry board. In a statement to the stock exchange, Frasers expressed concern regarding corporate governance, referencing the emergency subscription arrangement with Challice made in September. The company added that given its significant shareholding, it “hopes the board will engage positively on a Frasers appointee to the Mulberry board, a request that has been made several times in recent history”. Mulberry has since undergone a restructuring of the business, laying off a reported 85 positions.

A similar story has also begun to unfold at Hugo Boss, where just this week it was revealed that Michael Murray, Frasers Group CEO, was to stand for election to the German company’s Supervisory Board. In recent years, Frasers has been actively increasing, and sometimes decreasing, its holdings in the premium brand as part of efforts to reposition itself in this segment–a strategy to which Mulberry also belongs. Akin to the British label, Hugo Boss has also faced a challenging year, having lowered its full year outlook in the second quarter amid what it said was “challenging macroeconomic and geopolitical conditions” that had weighed on consumer demand. In a statement following his nomination, Murray said this aligned with Frasers' "huge respect" for Hugo Boss and its strategy.

The motive behind Frasers and Murray’s pursuit of a position on the Hugo Boss board remains unconfirmed, however, if this is to play out in a similar fashion to the group’s dealings with Mulberry, its likely Frasers simply wants a say in how the brand must progress in order to reverse falling sales figures. It is exactly this that was at the crux of its efforts to infiltrate the Boohoo board, if its slew of open letters, shareholder campaigns and regulatory filings were to be believed.

Spin off discussions and fundraisings heighten tensions

Akin to Mulberry, the fast fashion giant, which derives of Karen Millen, Boohoo and PrettyLittleThing, among others, has struggled to turnaround sales figures in recent months. For FY24, the group’s GMV was down 13 percent to 1.8 million pounds, while revenue dropped 17 percent, with core brands showing a GMV decline in the second half of the year of 4 percent.

It must be noted that Frasers is not the only shareholder to have expressed a sense of impatience when it comes to Boohoo’s proceedings. 2024 started off with a reemergence of fury over allegations of poor labour practices among Boohoo suppliers. Lenders then refused to extend a deadline for 75 million pounds of debt. Later in May, the group confronted shareholder revolt over executive incentive bonuses, which were proposed despite Boohoo reporting losses in FY24.

While the bonuses were waived in response to the backlash, just months later speculation began mounting about a possible split of brands currently housed under the Boohoo Group umbrella. According to The Times, Debenhams and Karen Millen were at the centre of such discussions being backed by several shareholders, who suggested spinning off the “better-performing” brands, possibly hinting at a growing resistance to Boohoo’s own efforts.

Just weeks after this report, on October 16, Boohoo published a Business Update coinciding with the exit of its chief executive officer, John Lyttle. In it, the group confirmed it was reviewing options for each of its divisions, though what form this strategy would take was not disclosed in the filing. What ensued after this was somewhat of a two-way war of words, with both Boohoo and Frasers openly criticising the other for their practices. This only heightened when Boohoo announced its intention to launch a fundraising plan, which ultimately drew in 39.3 million pounds across both a Placing and Subscriptions process, as well as a Retail Offer.

Now, the conclusion of the battle has seemingly fallen upon us, though it is yet to be seen what is to come from this result. Will Boohoo pursue a split of its subsidiaries? Will Frasers continue pursuing more control? What form will Boohoo’s turnaround plan now undertake? These are just some of the questions that remain without answers.