There are rumors circulating that Mike Ashley, the majority shareholder of Frasers Group (formerly known as Sports Direct), is considering the idea of making the company private. This potential move comes after the announcement that Ashley’s future son-in-law, Michael Murray, is set to take over as CEO of the company next year. Despite this change in leadership, Ashley will still maintain control of the company with his 68% stake.
The speculation about privatization has gained traction due to the strong trading performance of Frasers Group. While the company’s share price has seen a slight decline in recent days, its overall trajectory has been consistently upward. Over the course of a month, the share price has risen by more than 3%. In just six months, it has increased by an impressive 25%, and throughout the year, it has experienced remarkable growth of over 63%.
This upward trend can be attributed to Frasers Group’s shift in focus from its Sports Direct chain, which remains its largest revenue generator, to its premium retail unit. The company has been expanding the upscale Flannels retail chain across the UK and has even ventured into the beauty sector. Frasers Group also owns well-known brands such as House of Fraser and Jack Wills, in addition to holding sizeable stakes in Hugo Boss and Mulberry.
While Mike Ashley has a reputation for acquiring businesses at low valuations, the improved performance and rising share price of Frasers Group may require him to pay a premium to take the company private. It’s worth noting that rumors frequently surround Ashley’s business activities, with past rumors of potential bids for Mulberry and Hugo Boss, which the company denied.
Despite the challenges still faced by Frasers Group and the significant one-off costs it has incurred related to its properties over the past two years, the company is on track to report record profits of up to £350 million this year. This would be the highest profit figure since reporting underlying profits of £300 million in 2015.
According to a City source, a deal to take Frasers Group private may not be far off, especially with the recent launch of a £70 million share buyback. As Ashley already owns almost 70% of the company, reaching a 75% ownership threshold is a possibility that could facilitate private ownership. However, some analysts believe that the current high share price makes a privatization less likely. In fact, one analyst suggested that the ideal time to take the company private would have been when the shares were priced at less than half their current value.
At present, Frasers Group has chosen not to comment on the matter, leaving the potential for privatization open to speculation.
Useful links:
– The Telegraph – Up for grabs: aviation trying to weather shrinking market
– The Guardian – Hertz has turnaround plans for ex-rental cars
