18.12.2024
One of my early Christmas wishes is to be a ‘fly on the wall’ of a certain office in Manchester.
At the end of this week, Friday 20th December, the warring factions of Mike Ashley’s Frasers Group (LON:FRAS) and Mahmud Kamani’s boohoo Group (LON:BOO) will be facing each other in a voting contest.
There will be a General Meeting for boohoo shareholders being held at 10am that day at the law firm offices of Addleshaw Goddard at One St Peter’s Square, Manchester.
The business on hand concerns efforts by Ashley to oust Kamani from the Board of the group that he co-founded with Carol Kane.
There are ongoing comments from boohoo parties that investigators have been following various executives for some months, that drones are flying over its properties, together with other insinuated actions.
Furthermore, the hoped for sale of the group’s Soho office property has hit some hassles – with the group possibly having to cut money in the disposal of this asset as it sorts out its appalling financial mess.
The Two Sides
Frasers Group started as a small store in Maidenhead in 1982 and from there, grew to become a elf-proclaimed ‘global powerhouse’.
As the business evolved, 2019 saw the rebrand of Sports Direct International to Frasers Group; a reflection of the group's growth and change in market identity.
Led by Chief Executive Michael Murray, the business is set on a formidable upwards trajectory as it continues to expand with its pioneering approach to retail.
It provides consumers with access to the world's best Sports, Premium and Luxury brands with a vision to build the planet's most admired and compelling brand ecosystem.
As a leader in the industry, Frasers Group is committed to rethinking retail by driving digital innovation and providing unique store experiences to its consumers globally.
The group owns notable equity positions in a host of companies, including ASOS, Marks Electrical, Hornby, AO World, Currys, Mulberry Group, N Brown, Accent Group, Hugo Boss, THG, and many other such interests.
Capitalised at £2.77bn, with its shares trading at 610p.
Ashley owns 73% of the Frasers equity.
The boohoo Group, which was founded in Manchester in 2006, is a fashion forward, inclusive and innovative business.
The group considers that its brands are complementary, vibrant and scalable, delivering inspirational, on-trend fashion to its customers 24/7.
The diversity of its brands, including the group's five core brands - boohoo, boohooMAN, PrettyLittleThing, Karen Millen and Debenhams - enable it to serve a broad customer base, globally, with a primary focus on the UK and US markets.
Since its acquisition in 2021, Debenhams has been transformed from a retailer into a digital marketplace with a capital-light, low-risk operating model and a focus on fashion, beauty as well as home.
The boohoo group is concentrated on driving sustainable, profitable growth with technology and automation increasing efficiency across the business.
Capitalised at £512m with its shares trading at 33.68p.
Mahmud Kamani owns 11.32% of the boohoo Group equity.
Frasers owns 25.46% of the boohoo Group.
The Contention
Frasers Group considers that with Kamani in control, there has been a multi-year share price collapse and value destruction – that the shares are 93% off their highs, there has been an abysmal trading performance, with the reporting of dismal financial results, that there continue to be further supply chain allegations in circulation, and that there has been a sustained track record of governance failures from a “back pocket” board, there has been ‘related-party’ cronyism, together with ill-judged, value-destroying capital investment being made by the group.
The boohoo Group has responded by attacking Frasers, suggesting that Ashley would not be acting in the interest of boohoo shareholders, specifically because he has so many stakes in competitor enterprises.
It has also been supported by two independent proxy advisers, Glass Lewis and Institutional Shareholder Services, is their recommendation to boohoo shareholders to reject Frasers proposals at the meeting, which include the appointment of Ashley and ‘company restructure specialist’ Mike Lennon to the boohoo Board.
boohoo Chairman Tim Morris stated that:
"The Board has consistently said that due to obvious conflict points and because of their historical ties to Frasers, Mike Ashley and Mike Lennon are not appropriate candidates to join the Board in any circumstances, whatever commitments are offered.
Notwithstanding that, Frasers continues to refuse to agree to a number of the key protections that the Board would require should an appropriate representative be nominated.
These are key issues which need to be addressed for the protection of all Shareholders and it is not for Frasers to pick and chose which commitments it will give.”
Frasers has responded by stating that boohoo shareholders have lost money and there is justified disappointment with and distrust of the current leadership, in particular Mr. Kamani, and continued by stating that with the appointments of Mr. Ashley and Mr. Lennon, boohoo has the potential to become a valuable and profitable business.
In My View
Both sides are losers in this battle.
boohoo is strained financially and even if it wins this week’s vote, it will have to deal with Ashley and come to some agreeable conclusion.
For Frasers, it too could have problems if it wins the vote, with the Kamani ethos operating forever inside the boohoo camp, with the financial and trading mess to tidy up.
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