Mike Ashley loves a fight. But even by the British retail tycoon’s standards, it has been an eventful year of battles inside the courtroom and the boardroom.
His ongoing row with Boohoo, the online fast-fashion retailer in which his Frasers Group has a 28 per cent stake — over two board seats and amid accusations of mismanagement — follows recent high-profile stand-offs with other companies.
Earlier this year, Frasers dropped a €50mn lawsuit against Morgan Stanley in a London case that saw Ashley accuse the Wall Street bank of “snobbery”, relating to Frasers’ investment in Hugo Boss. It owns 15.2 per cent of the luxury fashion group and is pushing for a board seat.
More recently Frasers also considered swooping on leather handbag maker Mulberry, in which it holds a 37.3 per cent stake, but walked away after the brand’s majority shareholder, the Singapore-based Ong family, made it clear that it had no interest in selling the business.
But the Boohoo general shareholder meeting next Friday could be the most dramatic showdown yet. It will bring to a head weeks of often near-daily sharply-worded exchanges between Ashley’s camp and that of Mahmud Kamani, the commanding executive vice-chair and co-founder of Boohoo.
At the meeting investors in Aim-listed Boohoo will vote on whether to give board roles to Ashley, the mercurial majority owner and founder of Frasers, and his business associate, Mike Lennon, following Frasers’ so far unsuccessful demands that Ashley be installed as the fast-fashion retailer’s chief executive to nurse it back to health.
Lennon, praised for his retail and restructuring expertise by Frasers, has been a joint administrator for at least two Frasers-owned brands.
Frasers, which has amassed a collection of businesses such as Sofa.com, Jack Wills and Evans Cycles through acquisitions, has complained about “continued chaos” and “value destruction” after a 90 per cent fall in the value of Boohoo’s shares from their June 2020 peak. It has also accused the lossmaking company of “blatant hypocrisy” and presiding over a “catastrophic” £222mn debt refinancing.
Boohoo, in turn, has claimed “desperate people do desperate things” in response to Frasers’ salvos, and it reiterated on Friday that, consistent with the recommendations of two influential shareholder advisory groups, it was against appointing Ashley and Lennon to board. It added, however, that it would be willing to offer a single seat with certain conditions.
Tony Shiret, an independent analyst, said: “You’ve got two managements who are pretty aggressive about how they run their business . . . I imagine that the problem that Kamani has is that he thinks it’s going to be Studio Retail all over again, and basically as soon as Ashley has got his foot in the door, then he’ll knock the door down and make it very difficult for them.”
Boohoo has cited Studio Retail Group as an example of Frasers tactics, where it used its 30 per cent stake to “exert significant pressure on the existing management team”. After agitating for a seat on the board, Frasers subsequently bought the online retailer out of administration in 2022.
Since the spat over the trajectory of Boohoo started, both camps have set up websites setting out their stalls to shareholders.
On one side, Ashley’s Boohoodeservesbetter.com, carries the tag line “A simple choice: win with Mr Ashley or lose with Mr Kamani” and lists Ashley’s achievements, such as building Frasers into a £3.5bn company from a single shop in Maidenhead in 1982.
His adversary’s website, Boohooforall.com, states “Value for all shareholders, not just Frasers” and features a glossy video starring chief executive Dan Finley extolling its recent turnaround efforts. Another video quotes film character Rocky Balboa: “It ain’t about how hard you hit. It’s about how hard you can get hit and keep moving forward . . . ”.
Ashley and Kamani, both aged 60, first locked horns when Debenhams, the department store chain, collapsed in 2020. Ashley had been in negotiations to buy it out of administration, in an effort to recover some of the estimated £150mn he invested by buying shares and after failing to get himself appointed to an executive board role. But the Debenhams brand and website were ultimately sold to Boohoo for £55mn.
Frasers subsequently gatecrashed Boohoo’s deal to buy ailing fashion rival Missguided in 2022, and bought competitor I Saw It First, set up by Kamani’s brother.
Nick Bubb, an independent retail analyst, said: “Mike [Ashley] bears a huge grudge about the amount of money he lost in Debenhams and is still furious that he wasn’t able to buy the Debenhams brand when it went bust. He must also be furious that the Debenhams brand is the best-performing part of the Boohoo group.”
A representative for Ashley declined to comment. He previously said he did not want Boohoo to sell Debenhams and that he was supportive of its new chief executive.
The feud between Ashley and Kamani was reignited when Frasers began building its stake in Boohoo in June last year.
Frasers also owns a 21.1 per cent stake in Boohoo rival Asos, which has led to accusations from Boohoo of a potential conflict of interest, noting that all three compete in similar markets. This is something that advisory groups Glass Lewis and Institutional Shareholder Services have also raised as a concern, but which Frasers has dismissed several times.
If appointed to the board, Ashley has said he is “willing to agree that, for as long as I am a director of Boohoo, I will not provide any confidential information about Boohoo to Frasers, take on any board position at Frasers, discuss Boohoo or its business with Frasers, or accept any board position at any competitor to Boohoo”.
Boohoo is itself no stranger to being combative. Last year it waged its own boardroom battle at cosmetics brand Revolution Beauty, in which it is a shareholder, and forced the departure of its chief executive and chair.
The fight comes at a time when both Boohoo and Asos are having to fend off the threat from disrupters Shein and Temu, which have been growing at breakneck speed since the pandemic. Frasers, meanwhile, has to contend with an increase in day-to-day costs following the UK Budget and weaker consumer confidence.
David Hughes, a research analyst at Shore Capital, which downgraded Frasers to “hold” on Friday after a profit warning earlier this month, said its stake-building in other companies was ultimately a drag, despite the group repeatedly insisting that buying stakes has always been a strategic move.
Hughes added: “While Frasers, with the approval of key shareholder Mr Ashley, is fully entitled to make these investments, we view them as a distraction from the strength of the underlying business, adding unnecessary complexity to the P&L.” Shares in Frasers have lost around 30 per cent of their value since the start of the year.
One retail veteran chose to diplomatically describe Ashley and Kamani as “high-octane characters”.
But as each side gears up to the December showdown, Bubb added: “It’s all fair in love and war . . . so they’re having fun attacking each other.”
