Mike Ashley’s Frasers Group has built its stake in Asos to almost 9% – taking him close to the ability to block a takeover bid – ahead of a potential battle for control of the ailing online fashion business.
Ashley, the founder of Sports Direct, who has a long history of snapping up ailing brands, from House of Fraser to Everlast, has moved to gain influence at Asos. Its share price has fallen 63% since February amid falling sales and a slide into the red as the pandemic-induced online shopping boom evaporated.
The trainer king faces competition from some well-financed opposition led by fashion entrepreneur Anders Povlsen, the owner of Denmark’s Bestseller chain who is also a major shareholder in German online fashion seller Zalando and Scotland’s largest landowner.
Povlsen, together with his wife, Anne, owns about 221,000 acres of land across 13 Highlands estates in Scotland where they are seeking to regenerate forestry and wildlife.
He also bought the Jenners department store building in Edinburgh, which is being redeveloped into a hotel and leisure facility, sparking a tiff with Ashley’s Frasers Group, which owns the Jenners department store brand but could not agree a deal to remain within the building.
In 2021 Frasers was told to reinstate the historical Jenners signs on the building on Princes Street, which were seen as a key part of the listed building, after the retailer removed them without permission.
Now Povlsen and Ashley could be set to wrestle over a much bigger asset.
Asos is seen as a potential target after José Antonio Ramos Calamonte, the chief executive of Asos, who took over last summer, was forced to reveal a £291m loss in the six months to 28 February after sales fell by 8%, including a 10% drop in the UK amid what it called a “challenging trading backdrop”.
Povlsen and Camelot Capital Partners, a US hedge fund founded by young financier William Barker, who wants to emulate his hero Warren Buffett, both led the way in a recent £75m equity raise by Asos last month – part of refinancing package to replace a £350m loan, which was due to be repaid next year. Camelot, Asos’s second largest shareholder, has shown an interest in online fashion players, also snapping up a stake in the UK’s Boohoo in recent months.
Frasers, Asos’s third-largest shareholder, is understood to have taken part in the shareholder fundraising but is thought to be disappointed that the online fashion specialist did not take up its offer of a closer partnership.
Frasers’ boss, Michael Murray, Ashley’s son-in-law, is understood to have offered to share his “retail expertise” and build a stronger trading relationship between the two companies in return for an additional 5% stake, according to the Telegraph.
Ashley’s empire, which he built from his father’s single sport store in Maidenhead, has recently been developing its portfolio in fast fashion, snapping up I Saw it First and Missguided last year. Frasers already owns a suite of brands, including Jack Wills and Agent Provocateur, which it might like to push through Asos’s site.
Instead of joining up with Frasers, Asos opted to raise £75m by offering all its institutional shareholders the same deal, with shares for a further £5m fund raise offered to independent retail investors.
The shareholders stepped in alongside a £270m three-year loan facility provided by Bantry Bay, a firm backed by the hedge fund Elliott Advisors, which has also baled out UK brands Matalan and Superdry in recent months.
In a further twist, was recently reported that Turkish fashion business Trendyol, which is controlled by Chinese internet giant Alibaba, put forward a £1bn bid for Asos in December. While Asos’s market value is currently half that level, it is understood that no talks are under way with Trendyol whose home country is recovering from a devastating earthquake.
Frasers, the owner of Sports Direct, House of Fraser department stores and the Flannels designer fashion chain, began building a stake in Asos last autumn and has almost doubled its interest since then.
The latest increase to 8.8% from 7.4% cost about £10m and takes Frasers close to owning a 10% stake which gives it the power to block a statutory compulsory share purchase after any takeover offer. It would give Ashley a seat at the table if any bid does emerge.
Frasers declined to comment on why it had built up its stake in Asos.
Ashley has a long history of building stake in listed brands and retailers, from Debenhams to Hugo Boss, as a way to gain influence or build a trading relationship.
A spokesperson for Povlsen’s Heartland holding company said: “Regarding rumours about investments, mergers, and similar matters, we adhere to our standard practice of not commenting. This is primarily out of respect for legal considerations and regulations.
“We are pleased to be a part of Asos and have also supported the equity placement, which reflects our confidence in Asos’ long-term prospects. This investment will undoubtedly provide a stronger foundation and more operational freedom for Asos’ management to execute their ambitions, strategies, and plans.”