In his latest moves against Mahmud Kamani and his £390m-capitalised boohoo Group (LON:BOO) business, Mike Ashley and his 73% owned £3.37bn valued Frasers Group (LON:FRAS) have taken off the gloves and ready to start getting stuck in for a fight.
By way of a Shareholders Meeting, Ashley is demanding that Kamani be removed from the online group’s Board and that Mike Lennon and himself are elected as Directors, representing Frasers Group’s near 28% equity stake.
Kamani is said to have 12.8% of his group’s shares, while his family and friends have another 11%.
Late last week boohoo announced that Kamani was stepping down as Executive Chairman, taking a Vice-Chairman position instead, allowing the appointment of an independent Chairman in the shape of Tim Morris.
In rapid response to boohoo’s somewhat defensive move, Frasers commented that Kamani’s title may have changed but his grip on the company has not, stating that Kamani must go after overseeing a sharp plunge in its shares over the past three years.
Open Letter To boohoo Group Shareholders
Last Thursday, 21st November, Frasers published its Open Letter to the online group’s shareholders, noting its recently announced dismal Interim Results, together with an emergency fundraise that was required to satisfy an imminent and previously unannounced debt repayment, which Frasers states will only serve to further impede any positive turnaround.
Additionally, they seek the boohoo Board to requisition a further shareholder meeting to remove Kamani, and to prevent the Board from simply re-appointing him or any other director before boohoo’s next AGM.
“Recent events, in particular the Results, lack of transparency and further supply chain allegations, should leave shareholders in no doubt – Mr. Kamani must go.”
To the boohoo shareholders, Frasers makes various statements noting –
· Urgent change at the top of boohoo – the time is now.
· Results and refinancing catastrophe – far worse than shareholders could ever have imagined.
· A requirement for greater transparency after Kamani is removed.
· Declaring that the current Board has a performance history of which they should be ashamed.
· Recent allegations about its supply chain hassles are deeply troubling.
· The boohoo recent circular, is a litany of desperate and baseless claims.
· Concern about conflicts and competition is not an issue.
Frasers Group’s letter concludes that:
“Shareholders have lost money and there is justified disappointment with and distrust of the current leadership, in particular, Mr. Kamani.
With the appointment of Mr. Ashley and Mr. Lennon, boohoo has the potential to become a valuable and profitable business.
Boohoo urgently needs a reset, and the upcoming Shareholder Meeting is your opportunity finally to unlock the Company’s incredible potential.
Join us in helping boohoo get back on track.”
Now For Some Interesting Facts
Late on Friday, journalist Jon Robinson at CityAM posted an informative article containing various figures about boohoo and some of its brand subsidiaries.
The group recently announced a revenue of £807.8m for the six months to 31st August, down from £861.5m, while its pre-tax loss widened from £36.6m to £147.3m.
It’s ‘Prettylittlething’ brand revenues to end February were down from £634.1m to £475.8m, while it collapsed into a £6.5m loss (£22m profit).
Sales at ‘Nastygal’ fell to £24.1m (£67.3m), but with its pre-tax loss going from £12.1m to £10.2m.
The revenues at ‘Warehouse’ were down from £22m to £6.7m, with its loss deepening to £2.4m (£0.9m).
‘Karen Millen’ revenues were £70.1m (£82.1m), however its pre-tax profit was steady at £8.3m.
Revenues at ‘MissPap’ were slashed from £16.1m to just £6.3m, its pre-tax loss was £1.2m (£155,000 loss).
In My View
This whole situation could get nasty.
Shareholders in the boohoo Group must be holding their breath, while trying to decide whether to stick with the boss, Mahmud Kamani, who has seen his group’s shares down over 90%, in the last couple of years or so, as it falls precipitously into massive losses and is now desperately underfunded.
Or should they go with Mike Ashley, who’s group has tripled in price and is very profitable.
As to one newspaper columnist suggesting that Frasers should bid for boohoo – I would dismiss that as a possibility.
Why would Ashley want to take on such an indebted group – he has the biggest stake in the group already and probably does not need to throw more money at it?
If he does not get onto the Board and kick Kamani off in the process, then all he will probably need to do is wait until it sinks even lower, if not out, and then negotiate with the resultant Administrator for all of or just the appealing parts of the business.
Frasers Group shares are currently 747p, while boohoo Group shares are trading at around 30.70p.
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