Frasers Group has issued another threat to boohoo, reiterating that Mike Ashley should join its board and now telling shareholders that Mahmud Kamani should go.
This latest open letter follows what Frasers’ called boohoo’s “dismal” interim results and ahead of a shareholder meeting, set for 20th December.
It added that it had written a further letter to the boohoo board to requisition another shareholder meeting to remove the company’s Executive Chairman, and “to prevent the Board from simply reappointing him or any other director before boohoo’s next AGM.”
Again it requested that Ashley and Mike Lennon should be appointed as directors “as the only hope of turning boohoo’s fortunes around for all stakeholders.”
The lengthy letter also seeks to show how a boohoo without Mahmud Kamani, but with Ashley and Lennon would be different.
It claims they would push for total transparency; review boohoo’s financing arrangements; also “lead the drive to return boohoo to profitability”; “fix” its supply chain issues; and “return to a winning mentality.”
The letter also turns to boohoo’s public concerns about Frasers’ behaviour, not least its investments in competitors, including ASOS.
According to Robert O’Donoghue K.C., who Frasers employed to look into the competition argument:
“As we understand it, the basic allegation is that if Mr. Ashley were made CEO of Boohoo, competition law issues could arise due to overlapping competitive activities of the brands/businesses that Frasers owns or in which it has invested – in particular ASOS. For example, it is suggested by the Board that information acquired by Mr. Ashley in his capacity as a Boohoo director, or decisions made by him as Boohoo CEO, could lead to anticompetitive consequences vis-à-vis those other brands, in particular ASOS.
“[…] We consider that there is no substance at all to these suggestions under UK competition law. There is no competition law issue, nor even a realistically arguable one.”
The letter from the KC concluded:
“For so long as Mr. Ashley is on the Board, Mr. Ashley is willing to agree that he will not (without the consent of a simple majority of the rest of the Board):
“(a) provide any confidential information he receives in his capacity as a director of Boohoo to any employee, officer or director of Frasers. This restriction would continue to apply for a period of twelve months following Mr. Ashley ceasing to be on the Board;
“(b) take on any board position at Frasers;
“(c) participate in any discussions of the board of Frasers or Frasers’ executives regarding Boohoo or its business; and
“(d) take on any board position at any competitor of Boohoo. This restriction would continue to apply for a period of six months following Mr. Ashley ceasing to be on the Board.
“12. In addition, Mr. Ashley would be willing to confirm in writing to Boohoo his awareness of, and compliance with, his fiduciary duties, and in particular to act in the best interests of Boohoo.”
Boohoo has yet to respond to today’s missive, but this morning it did announce that Tim Morris had been appointed as the company’s independent Chair with immediate effect.
Morris will be responsible for overseeing the Group’s recently announced Business Review, which will be led by new Group CEO Dan Finley and supported by the rest of the Board.
Mahmud Kamani will become Executive Vice Chair with immediate effect.
“I am delighted to be appointed by the Board as Chair of boohoo. My appointment follows a series of decisive steps taken by the Board since launching its business review, including the completion of the refinancing, the appointment of Dan Finley as our new CEO and the successful fundraising,’ said Morris.
“I am excited to lead boohoo through the next phase of its development, alongside Dan and the wider Board, with the focus on delivering maximum value for, and protecting the interests of, all shareholders”.
Kamani has also “reconfirmed his agreement to provide assurances around his relationship with the Company as a major shareholder, for the benefit of all shareholders.”
These are:
i) representations and undertakings that Mr. Kamani will have no involvement in the commercial decision making of any competitor of boohoo and will not share any commercially or competitively sensitive information with any other party;
ii) an indemnity from Mr. Kamani in relation to any loss that boohoo suffers if these representations and undertakings above are breached;
iii) an undertaking from Mr. Kamani that any transactions involving boohoo and a related party are conducted on arm’s length commercial terms with him playing no role in related board discussions or decision making;
iv) a statement that he has no intention to make an offer for the company (see Takeover Code note below)
v) a statement that he has no intention to purchase any of its assets;
vi) an undertaking that for 6 months from the date of this announcement, Mr. Kamani will not, without the unanimous agreement of the Board:
• acquire any boohoo shares, debt or other securities;
• seek to merge boohoo with a competitor;
vii) an undertaking that for so long as Mr. Kamani is on the Board and for up to 12 months after such a date as they leave the Board, Mr. Kamani will not, without the unanimous agreement of the Board:
• take any action which might reasonably be expected to result in boohoo being unable to operate as an independent business;
• seek to disrupt the commercial strategy of boohoo;
• seek the appointment of any other nominee to the board of boohoo;
• requisition any general meeting of boohoo.
Kamani has also agreed to waive his current salary in boohoo for the next 12 months and has stated that he has “no intention to make an offer for boohoo”.
