Frasers’ shopping spree: Mike Ashley-owned empire snaps up stakes

Mike Ashley’s Frasers has been on quite the shopping spree in recent weeks. The group, formerly known as Sports Direct, has injected almost £300mn in listed rivals ranging from white goods sellers AO World and Currys to fast-fashion brands Asos and Boohoo.

The moves have left some analysts and commentators scratching their heads as it is unclear what Frasers hopes to achieve. Buying stakes in other companies was Ashley’s trademark move — but that was before he handed the reins of his retail empire to his son-in-law Michael Murray, 33, just over a year ago.

The new chief executive has been steering Frasers away from pile-it-high outlets to a more upmarket offering, especially through its luxury chain Flannels, and has sought to reset relations with the City after Ashley’s often fractious encounters with investors. The 58-year-old entrepreneur owns about 70 per cent of Frasers.

Nick Bubb, an independent retail analyst, said he was “baffled” by the wave of recent stakebuilding, adding that they had Ashley’s “fingerprints all over them”.

The company said in an announcement this week that it would continue to build on its “long track record of establishing supportive shareholder positions in attractive retail companies”. It also has investments in UK clothing retailer N Brown and luxury brand Mulberry, as well as Hugo Boss.

Murray has spoken to the bosses of Asos, Currys and AO World since Frasers appeared on their register, according to people familiar with the discussions, as part of his efforts to change Frasers’ image as a disruptive investor after previous attempts by Ashley to remove top executives at companies where he became a shareholder, such as at Blacks Leisure. He wanted the relationships to be collaborative, the people said.

But it was Ashley himself who spoke to Boohoo tycoon Mahmud Kamani because of their history, according to a person familiar with the matter. Frasers last year gatecrashed Boohoo’s deal to buy ailing fashion rival Missguided, and also bought competitor I Saw It First, set up by Kamani’s brother. The sportswear billionaire also battled with Boohoo for control of Debenhams after the department store’s collapse, which the fashion brand now owns.

People familiar with Murray’s thinking say he is the ultimate decision maker, and although he occasionally seeks the counsel of Ashley and other advisers he has his own “watch list” of companies that Frasers might invest in.

“Behind it all, whoever is making the decisions, thinks that all of these companies are very lowly valued, so they think there is a bit of insurance in whatever they do from having stocks that have gone down a lot — but some are more tradable than others,” said Tony Shiret, a managing director and retail analyst at Panmure Gordon.

A recent tech sell-off and the end of the pandemic-driven boom in online shopping has weighed on the retail sector. The share prices of Asos and Boohoo have tanked 93 per cent and 82 per cent respectively in the past five years. AO World and Currys have not fared much better over the same period and are down by 42 per cent and 71 per cent — while Frasers is up 71 per cent.

Some questioned the strategic value of investing in such different types of retailers. “Where is the attempt to justify buying stakes in both Asos and Boohoo? And in AO.com and in Currys? It doesn’t make sense . . . ,” Bubb, the retail analyst, said. “At least Mulberry and Hugo Boss are upmarket fashion brands that can help the ‘elevation’ strategy.”

Others are less concerned, pointing to Fraser’s overall size, with annual revenues of £4.7bn and pre-tax profits of £366mn. “You add them all up and frankly that’s less than a year’s free cash flow for Frasers,” said Panmure Gordon’s Shiret. “So it’s not a biggie.”

Ashley, who built Frasers into a £3bn company from a single store in Maidenhead in 1982, has a long history of buying stakes in listed companies and retailers, often as a way to gain a trading relationship or a seat at the table should a company be put up for sale. Previous retailers he has acquired include House of Fraser, Jack Wills, Evans Cycles and Game.

In 2008 he snapped shares then worth £1 each in rival JD Sports and subsequently offloaded some in 2016 when the stock hit more than £11. In 2018, he seized control of House of Fraser as it teetered on the brink of collapse after initially taking an 11 per cent stake in the department store chain. His acquisition of Studio Retail, which also sells cheap electronics and is part of the rationale for investing in AO and Currys, followed a similar pattern.

However, the chase for Debenhams backfired. Frasers built up a 30 per cent stake before trying to take it over but the retailer went bust, leaving the company an estimated £150mn out of pocket.

Frasers could face stiff opposition from other shareholders if it attempts to rock the boat at AO, Asos and Boohoo where the top two or three investors own large chunks of shares.

John Roberts, founder and chief executive of AO, owns about a fifth of the company. Asos also has powerful shareholders: Camelot Capital Partners, a US hedge fund founded by financier William Barker, is the second-largest stakeholder after entrepreneur Anders Holch Povlsen, the owner of Denmark’s Bestseller clothing chain. Barker is also one of AO’s largest shareholders with a 20 per cent stake, and an investor in Boohoo.

Povlsen, Scotland’s largest land owner, has already had a run-in with Ashley over the Jenners department store in Edinburgh, whose building he owns. Frasers, which owns the Jenners brand, failed to reach a tenancy deal with Povlsen.

AO, Asos, Boohoo, Currys and Frasers declined to comment.

There is a sense among industry observers that with arch rival Sir Philip Green out of the frame following the collapse of his Arcadia retail empire, Ashley can style himself as the new king of the high street by building a portfolio of investments. Other executives believe he is keeping rivals on their toes.

“You’d need to be Mystic Meg to know what’s going on here,” said Shiret.