Hugo Boss has urged shareholders to reject Frasers Group's €2 billion (£2.3 billion) takeover offer, saying on Thursday that the €38-a-share bid from its largest shareholder significantly undervalues the German fashion group and fails to reflect its long-term prospects.

The recommendation follows a review by Hugo Boss's management and supervisory boards after Frasers, which owns around 26 per cent of the company, launched a voluntary takeover offer last month. Under German takeover rules, shareholders seeking to raise their stake beyond 30 per cent must make an offer for all remaining shares, and Hugo Boss said the bid reflected the statutory minimum price rather than the company's intrinsic value.

Stephan Sturm, chair of Hugo Boss's supervisory board, said: "Following a comprehensive and independent review, we have concluded that the offer price is financially inadequate and fails to appropriately reflect Hugo Boss's value and future potential." He added: "We look forward to maintaining a constructive relationship with Frasers Group as single largest shareholder of Hugo Boss."

According to Reuters, Hugo Boss said the offer appeared to be "primarily designed" to allow Frasers to increase its shareholding rather than secure full ownership, noting that Frasers had indicated it supported the company's existing management and strategy. Chief executive Daniel Grieder said: "Hugo Boss has a well-defined strategy, a strong financial profile, and a compelling path to superior long-term value creation," adding that the board believed the offer failed to capture the company's intrinsic value.

Frasers, controlled by Mike Ashley, has steadily increased its investment in Hugo Boss since 2020 as part of a wider push into premium fashion. The retailer said when the offer was announced that it intended to remain a long-term investor, supported Hugo Boss's leadership and did not plan structural changes to the business if the bid succeeded.

Analysts viewed the low-premium offer as a tactical move linked to German takeover regulations rather than an attempt to acquire immediate control. Felix Jonathan Dennl, an analyst at Metzler, told Reuters the offer was "highly tactical" and likely to face resistance, while Citi said in a research note that the price represented "the mechanical extension of an accumulation strategy" rather than a valuation of the business.

Investors have until 27 July to decide whether to accept the offer. Hugo Boss shares traded close to the €38 offer price on Thursday, while Frasers shares were little changed.

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