Frasers Group/boohoo Group – ‘This has to stop. What will they try next? Desperate people do desperate things.’ - The Dispute Continues

Mike Ashley’s Frasers Group (LON:FRAS) is continuing to turn up the volume of its contention with the way that Mahmud Kamani is running the boohoo Group (LON:BOO).

It all heated up again yesterday as Frasers published an Open Letter to boohoo that is stirring the pot even more.

Following market whispers that Umar Kamani, one of Mahmud’s sons, was being lined up for potential executive corporate appointment as the online fashion group tries to sort out its financial problems, was compounded by group CEO John Lyttle announcing that he was looking to stand down.

An attempt at refinancing the group debt and its terms piled on the agony as far Ashley was concerned.

As the group’s largest shareholder, with some 27% of the boohoo equity, Ashley was obviously getting his ire built up as the fashion firm appeared to be making wrong decisions, accordingly he then put himself up as future CEO instead.

Kamani and his Board of Directors rapidly appointed a replacement CEO from within the boohoo ranks, namely Dan Finley, 41, CEO of its Debenhams subsidiary.

It also announced that it would be holding a corporate review of its operations – which market observers instantly viewed as a signal that various parts of the boohoo business would be ‘sold off’ or stringently reorganised.

Mutterings rapidly spread that Kumani’s sons and ‘friends’ may well be given the opportunity to pick away on the boohoo bones.

The Anger Piles On

Yesterday Frasers published an Open Letter sent to Board of Directors of the boohoo Group – strongly demanding various measures.

It asked the Board to stop, once and for all, its utter disregard for shareholder views.

Stating that boohoo and its shareholders deserve better.

Frasers noted that it continues to believe strongly in the potential of the boohoo business and the quality of its brands.

However, it declares that the directors have pushed boohoo into a terrible refinancing, while refusing to engage properly with Frasers on it.

They have then rushed out a CEO appointment to try to block the say of shareholders.

Frasers Demanded That

‘This has to stop. What will they try next? Desperate people do desperate things.’

On Thursday of last week, 31st October, Frasers wrote to the Board to express its grave concerns about the Board potentially agreeing to dispose of boohoo’s assets.

Frasers asked the Board to confirm in writing that it would not commence any process or enter into any agreement, whether binding or non-binding, for a disposal of any of boohoo’s assets without first engaging with Frasers on alternative options.

It noted that given the market headwinds and commercial difficulties that boohoo is currently facing, any asset disposals by the company, including of any of its five core brands or the Soho office, would be executed from a position of weakness and unquestionably be at a discounted valuation, and would therefore be wholly unacceptable without prior shareholder approval.

In light of this, Frasers now makes its position very clear:

the Board must urgently and publicly confirm that:

- boohoo will not make a disposal of any asset or business line, in whole or in part, without prior shareholder approval; and

- prior to agreeing to any such disposal, the Board will obtain and publish the confirmation of an independent global adviser/investment bank that the terms of the disposal are fair and reasonable, the disposal has been conducted at arm’s length and the disposal is in the best interests of boohoo’s shareholders.

The shares of the boohoo Group are currently trading at 30.90p, valuing the loss-making debt-ridden enterprise at £392m.

Frasers Group, valued at £3.49bn, sees its shares lower, as the market takes the view that it does not like ‘public sprawling’, now at just 754.50p.