‘Be Bold, Be Open, Be Responsible, Be Imaginative’ – those are the values that the Mulberry Group (LON:MUL) promotes to its employees. 

I would guess that Mike Ashley, who controls 73.3% of Frasers Group (LON:FRAS) and his CEO son-in-law Michael Murray, may well have different views about those corporate edicts. 

The £84m capitalised loss-making handbag maker, whose signature bags sell at around £1,395 each, is in dire trouble and needs a shed load of cash to keep itself as a ‘going concern’ – especially having lost £34.1m last year on sales of £152.1m.  

That means it loses £311 for every handbag it sells, that does not sound like good business to me. 

However, two billionaires are now locked in a tussle to save the Somerset-based brand. 

And who knows, others may well be interested too. 

The Business 

I remember meeting Mulberry founder Roger Saul and his wife, former Dior model, Monty, years ago when I went down to Chilcompton, near Bath to look around the group’s leatherworks and factory. 

Founded in 1971 in Somerset, Mulberry, which listed on AIM in 1996, is known for classic leather bags such as the iconic Bayswater and Alexa, as well as accessories and womenswear.  

It is the largest manufacturer of luxury leather goods in UK, its two Somerset factories produce 50% of bags, boasting class-leading quality representing best value for price in the sector. 

However, in recent years the group has hit a number of hurdles, including the removal of tax-free shopping for tourists in the UK, forcing it to close its Bond Street store in February 2023.  

It claims to have 1,400 employees globally, with its head office in London, two factories in Somerset, and five international offices (Paris, New York, Hong Kong, Tokyo, Seoul). 

Ong Beng Seng 

The 80-year-old Singaporean property billionaire Ong Beng Seng, and his 77-year-old wife Christina, control Challice Limited, which owns 56% of the Mulberry equity, has within his empire investments in the Singapore Grand Prix, Hard Rock Resorts, and Four Seasons hotels, and he is said to be worth $1.5bn. 

He was charged in Singapore last Friday with abetting a public servant in obtaining gifts and with abetting the obstruction of justice. 

The two charges are linked to the Corrupt Practices Investigation Bureau’s investigations into former transport minister S. Iswaran, who the day before was charged among other things, with accepting a number of valuable items like hotel stays and Formula 1 tickets from Ong. 

Mike Ashley 

Said to be worth some $5bn 60-year-old Ashley, through his 77.3% stake in the Frasers Group, has interests in Currys, AO World, ASOS, boohoo Group, Hugo Boss and a myriad of other investments. 

It is believed that Frasers first invested in Mulberry way back in February 2020, buying a 12.5% stake for some £19m.  

At that time, it said its focus was building stronger relationships with premium third-party brands as a key strategic priority for the group was the elevation of its retail proposition. 

In late 2020 Frasers Group ruled out making a bid for the luxury brand. 

Mulberry has long been available to shop via Fraser’s Flannels brand and its House of Fraser department store chain. 

Late last week Frasers purchased another 3.96m shares in Mulberry, taking its holding up to 37.26% of the equity. 

The Refunding 

After announcing a poor set of Trading results on Friday 27^th September, Mulberry announced that Challice was subscribing £10m for 10m new shares in the company at 100p a share, alongside offering Retail Investors the ability to subscribe for 750,000 new shares at the same price. 

It has been announced this morning that Retail Investors only took up 392,013 of the 100p shares on offer, but then it is a strong pointer that the two billionaires control 93% of the equity between them, leaving not many shares held by private punters. 

Former MD and Life President Godfrey Davis holds some 1.5% 

The group stated that the net proceeds of the Capital Raising will be used to strengthen its balance sheet and provide financial flexibility to support plans being developed by Andrea Baldo, the new CEO and the management team to return the business to profitability and drive future growth. 

Frasers Group was not made aware of the cash call until immediately prior to its announcement, so it obviously did not appreciate being left in the dark and accused the luxury brand of a total lack of engagement. 

“As a committed long-term investor in Mulberry, Frasers would have been willing to underwrite the subscription in its entirety, potentially on better terms for the company.  

Given this total lack of engagement, we believe the status quo to be an untenable position for Frasers and the other minority holders of Mulberry shares.” 

Mulberry posted a pre-tax loss of £34.1m in the year to March 30, down from £13.2m profit previously and said that sales had fallen 18% in the first 25 weeks of its current financial year. 

Frasers Offer 

Last Monday, 30^th September, Frasers stated that it was considering making an £83m Offer of 130p for every Mulberry share, which was at a 30% premium to the Challice price. 

The two sides are said to have ‘talked’ but the result was a firm rejection of Frasers possible bid. 

It has until Monday 28^th October to firm up on its proposal. 

Mulberry – another potential partner lined up? 

Sector professionals take the view that Ong will not sell up his stake to Frasers – so what now? 

Founder Roger Saul thinks that LVMH could be just the right owner for Mulberry, which he suggests could fit in very well into its luxury fashion goods portfolio. 

In July this year the 52-year-old Andrea Baldo was appointed CEO of Mulberry. 

At that time Chairman Chris Roberts stated that: 

“Andrea’s international fashion brand expertise, creativity and strategic thinking meant he was absolutely the right person for this role,” 

He was previously CEO of GANNI, which is one of the fastest growing advanced contemporary fashion brands in the dynamic global affordable luxury womenswear market.  

Founded in Copenhagen, Denmark in 2000, GANNI is a leading advanced contemporary fashion brand offering differentiated women’s ready-to-wear clothing, it has established an international presence through its owned stores and more than 400 premium retailers in 20 countries including Denmark, Norway, Sweden, the UK, Germany and the U.S.  

GANNI is owned by L Catterton, the $34bn AUM investment empire which invested in the business in 2017.  

L Catterton, which claims to be the largest and most experienced consumer-focused private equity group in the world, has made more than 250 investments in leading consumer brands across all segments of the consumer industry.  

The question is whether Andrea has the guts for this billionaire turmoil? 

Or could L Catterton, LVMH or A N Other be interested in taking both Ashley and Ong Beng Seng out of their holdings and then fund Baldo’s attempts at refocusing Mulberry and take it downmarket? 

Petro Matad is set to begin production in Mongolia more than a decade after first discovering oil at the Block XX field.

Investors will be delighted to learn Petro Matad has received approval from the Ministry of Industry and Mineral Resources to reclassify oil production well pads, eliminating the need for construction permitting.

This has allowed the company to commence construction of long-term production facilities at Heron-1, with production expected to start in October. The company is finalising a cooperation agreement with the Block XIX operator for transport, processing, and export operations.

In addition, preparations are underway to test the Heron-2 well, with results expected in early November. The company aims to bring this well online in November if the test results are positive. The removal of construction permitting requirements has improved the chances of getting Heron-2 into production this year.

Today’s announcement contained a slight negative in terms of Gobi Bear exploration activities, which could have yielded a more upbeat outcome than the decision to suspend operations there for the time being.

The Gobi Bear-1 exploration well has been drilled and logged, showing potential hydrocarbon presence. However, due to ambiguous results, the well has been cased and suspended pending further evaluation and a likely well test to determine its production potential.

“The last few weeks have seen a lot of activity and some significant progress,” said Mike Buck, CEO of Petro Matad.

“We are extremely grateful to the recently appointed Ministers of Mining and Construction for their support in reclassifying oil production well pads to avoid the unnecessary burden of construction permitting regulations that were not designed for works of this kind. Our focus continues to be getting Heron-1 on stream as soon as possible and hopefully Heron-2 can also be brought onstream during the 2024 operational season.

“The Gobi Bear-1 result is a teaser but if oil is present in these well-developed reservoirs at such easily and cheaply drillable depth that could be a very significant result for the Company. As such, suspending the well allows us to gather data to refine our understanding and determine how best to get a definitive answer.”

The FTSE 100 rebounded on Friday after a blowout US Non-Farm Payrolls for October and erased early losses to trade broadly flat at the time of writing. One would expect further choppiness throughout the session.

The US economy added 254,000 jobs in September, far more than the 150,000 predicted by economists. The big question for investors is whether this good news for the economy will be good news for stocks.

Such a strong beat is undoubtedly a major positive for the US economy and will go a long way to dispelling fears about a US slowdown. However, traders had been eyeing a potential 50bps interest rate cut at their next meeting. This now looks very unlikely with US growth appearing to be in good shape.

“While focus remains squarely on the employment side of the dual mandate, Chair Powell’s recent assertion that the Committee is “not in a hurry” to cut quickly, along with today’s incredibly solid data slate, means that a return to a more normal cadence of 25bp cuts is likely at the November meeting, and at each meeting beyond that, until the fed funds rate returns to a neutral level next summer,” said Michael Brown, Senior Research Strategist at Pepperstone.

“That said, the data-dependent FOMC will respond if labour market conditions weaken, with larger 50bp cuts on the table particularly if unemployment rises north of the 4.4% median forecast for this year and next.

“For sentiment, the forceful ‘Fed put’ should see the path of least resistance continuing to lead higher for equities over the medium-run, though conviction in the short-term could well be somewhat lacking, owing to ongoing geopolitical risks in the Middle East.”

The initial reaction to the jobs report was a jump in stocks and bond yields. S&P 500 futures were firmly higher and the dollar soared. There was also a jump in the FTSE 100, which recovered losses after a soft start to trade on Friday.

In the UK, rising oil prices didn’t provide much support for BP or Shell, leaving the index vulnerable to domestic constraints. However, the initial general optimism around the jobs report lifted all boats, taking London’s leading index back to flat on the session.

“Oil prices continued their ascent, rising another 0.8% to $78.21 per barrel and putting the commodity at its highest value since August. This is good news for oil producers but bad news for millions of companies and consumers as they face higher energy and transport costs,” said Russ Mould, investment director at AJ Bell.

JD Sports was the top faller as investors continued to checkout of the stock following worrying news from Nike, it’s largest supplier of sportswear.