The open letter spat between the boards of boohoo and Frasers is entering its third week.
Once again, boohoo has hit back at Mike Ashley’s company, this time accusing Frasers of focusing on “its own commercial self-interest.”
Just in case you’re new to this, let’s rewind to October, when John Lyttle announced he was stepping down as CEO of boohoo.
A few days letter, Frasers released the first of a series of open letters to the Manchester online retailer accusing it of having an “abysmal trading performance and share price collapse.” It also said that its founder, Mike Ashley, was the only person who could turn it round.
boohoo followed up with its own open letter responding to the criticism, but then more importantly, appointed a new CEO, which wasn’t Mike Ashley. Instead it was former Debenhams boss, Dan Finley.
Debenhams was acquired by boohoo in 2021. Its largest shareholder before the buy-out was Frasers, which was also one of the bidders for the high street brand.
Frasers Group, which now has a dedicated Boohoo PLC page on its investors website and has also set up the boohoodeservesbetter site, is now on open letter #4 (or possibly #5, according to boohoo).
The latest asks the Board “to stop, once and for all, its utter disregard for shareholder views. boohoo and its shareholders deserve better.
“We continue to believe strongly in the potential of the boohoo business and the quality of its brands. However, 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. This has to stop. What will they try next? Desperate people do desperate things.”
It has requested that boohoo’s board confirms that it won’t make any disposals of its assets “in whole or in part” without prior shareholder approval.
Also that prior to agreeing to any such disposal that it 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.”
Later the letter threatens legal action:
“We remind each member of the Board to carefully consider their legal and regulatory duties, in particular their duty to act honestly and in good faith in the way most likely to promote the success of the company for the benefit of its members as a whole. We also remind them of their duty to act fairly as between shareholders. Any disposal of boohoo’s assets in breach of these duties, including any disposal that may occur at an undervalue and/or potentially to related parties of Mr. Kamani, could expose the directors to personal liability to boohoo, and Frasers and other shareholders would be forced to consider our legal rights of redress.
“In particular, we ask each of the non-executive directors on the Board, namely Alistair McGeorge, John Goold, Tim Morris, Kirsty Britz and Iain McDonald to consider their personal duties. If it turns out that they have breached those duties, Frasers will not hesitate to push for legal action against them personally.”
So over to boohoo, which also hasn’t held back.
“The Board remains committed to open and transparent engagement with all of its shareholders, including Frasers and that it is fully aware of, and is continuing to act in accordance with, its duties. The Board is also committed to ensuring it takes the right steps to drive the Group in the interest of all shareholders and not just Frasers’ self-interest,” it responded.
“In its announcement of 24 October 2024, the Board noted that while it remains willing to discuss board representation with Frasers in a constructive manner, it has been clear with Frasers that it will only offer a seat for an appropriate non-executive director and that before any appointment can be made, appropriate governance controls will be required to protect the Company’s commercial position and the interests of all other shareholders.
“boohoo has repeatedly sought assurances from Frasers in this regard and none have been provided. boohoo has also repeatedly asked for, and has been promised, non-public information in relation to Mike Ashley’s interests and role in competing businesses. This information has not yet been provided either.
“Alongside the open letter, Frasers sent a separate letter to the Board, which Frasers has chosen not to publish. In that letter, Frasers agreed to a meeting with boohoo to discuss Frasers’ concerns in relation to any potential disposals of assets and the Board’s concerns in relation to Frasers’ request for board representation. This meeting was suggested by boohoo to Frasers last week and the Board is therefore disappointed that Frasers omitted to mention this meeting in their open letter, which was therefore inaccurate and misleading.”
The Manchester company also pointed out its concerns “in relation to Frasers behaviour.”
“1. Frasers is not an independent shareholder in the Group, focused solely on the value of its investment. It is a trade competitor that is seemingly focused on its own commercial self-interest. Many of Frasers’ brands compete with the Group’s brands, including boohoo, PrettyLittleThing and Karen Millen. Debenhams is also a leading competitor of House of Fraser, and Frasers was the largest shareholder in Debenhams prior to it being acquired, as well as being a competing bidder when boohoo acquired Debenhams in 2021.
“2. Frasers is also a large shareholder in ASOS plc, which competes with boohoo’s brands. Frasers also has a well-publicised history of making significant investments in other UK retailers which also compete with boohoo.
“3. The Board considers it wholly inappropriate for Frasers to seek to leverage its significant shareholding in boohoo and other UK retailers to promote its own commercial self-interest, such as Frasers PLUS, at the expense of the other shareholders and will take all steps necessary to protect its commercial position and shareholders best interests.”
It continued:
“In order to ensure that all shareholder interests in boohoo are protected, the Board also wishes to make clear, for the avoidance of any doubt, the commitments it will require from Frasers before it will agree to board representation. The Board is mindful that both Frasers and boohoo have subsidiaries regulated by the FCA, and the Company has to take into account all shareholders when considering conflicts of interest.
“Proactively, and with the Group’s corporate governance framework squarely in mind, Mahmud Kamani, boohoo’s other major shareholder (who, together with his family and related family trusts, is interested in approximately 23.21% of the Company’s issued share capital) has confirmed that he has no intention to make an offer for boohoo and will provide the Board with the same assurances it is seeking from Frasers once Frasers have agreed to provide them.
“This sends a clear message that Mr. Kamani’s interests are entirely aligned with maximising value on behalf of all shareholders.
“The Board calls on Frasers, Mike Ashley and Mike Lennon, or any other potential Frasers’ representative, to do the same or to explain why they are unable or unwilling to give these commitments.”
It has also listed a series of strict conditions that a potential new board member must agree to, including having no involvement in the commercial decision making of any competitor of the company and that they will not share any commercially or competitively sensitive information with any other party.
Plus an “indemnity from Frasers in relation to any loss that boohoo suffers if these representations and undertakings above are breached.”
boohoo concluded by reiterating John Lyttle’s comments, that they believed the group was “fundamentally undervalued” adding that Frasers’ “continual legal letters and public posturing are not conducive to maximising value for all shareholders.”
