Luxury British handbag maker Mulberry has rebuffed an £83 million takeover offer from Mike Ashley's Frasers Group, asserting that the bid "does not recognise the company's substantial future potential value".

Frasers Group, which already owns a 37 per cent stake in Mulberry, proposed a cash offer of 130p per share on 30 September, representing a 30 per cent premium on the retailer's recent share price. The offer came in response to Mulberry's announcement of an emergency £10.75 million share placement to bolster its balance sheet.

Mulberry's board, after consulting with financial advisers and its majority shareholder Challice, concluded that the offer undervalued the company. Challice, which holds a 56.1 per cent stake, voiced support for the current turnaround strategy led by new chief executive officer Andrea Baldo, who joined in September.

The luxury retailer plans to proceed with raising over £10 million in cash, stating that this would allow all shareholders to participate in the company's recovery efforts on equal terms.

Frasers Group expressed concerns about Mulberry's future after its auditors flagged "material uncertainty related to going concern" on Friday. In a statement, Frasers said it would "not accept another Debenhams situation where a perfectly viable business is run into administration".

Clive Black, an analyst at Shore Capital, commented on the potential for "much emotion and potential shenanigans" as Frasers faces off against Challice. "Quite whether the two large and dominating shareholders can come to an agreement will be at the heart of the next steps, we shall watch with interest," Black noted.

Mulberry reported a £34 million pre-tax loss for the year ending March 2023, compared to a £13 million profit the previous year. Sales fell by 4 per cent to £153 million, with an 18 per cent decline reported for the subsequent 25 weeks.

The company's new chief executive officer, Andrea Baldo, formerly of fashion label Ganni, took over from Thierry Andretta on 1 September. Baldo, who previously led a turnaround at Italian streetwear brand Diesel, faces the challenge of repositioning Mulberry in a competitive luxury market.

Under UK takeover rules, Frasers Group now has until 28 October to announce a firm offer or walk away. The Mulberry board stated it remains open to engaging with Frasers on a pro-rata basis for its share in the capital raise.

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