(Bloomberg) — Frasers Group Plc, the retail group controlled by British billionaire Mike Ashley, increased its stake in Hugo Boss AG to nearly 48% but fell just short of overall control of the German fashion house.
The company behind Sports Direct, Flannels and House of Fraser made an unsolicited cash bid of €38 ($43.96) a share in June for Hugo Boss, just 4% above the last closing price before the offer.
The German label, known for pricey suits and underwear, had urged shareholders to reject the bid, saying it didn’t reflect the company’s value and potential. In the event, only 17.6% of investors accepted, according to a statement Tuesday.
Shares of Frasers rose as much as 3.4% in London trading on Tuesday before paring the gain, leaving them up 20% this year. Hugo Boss slipped as much as 0.8% in Frankfurt, and traded at €37.94 at 12:06 p.m. German time. The stock has gained about 5% this year.
Frasers has a reputation for building up positions in retailers across Europe and then seeking change. It’s also pushing more into luxury. The second-largest shareholder in handbag maker Mulberry Group Plc recently took a position in Burberry Group Plc, and bought storied department chain Harvey Nichols out of insolvency last week.
Frasers has taken an activist role since investing in Hugo Boss, which is in the middle of a reset under Chief Executive Officer Daniel Grieder aimed at improving performance by closing some stores and streamlining product assortments. It’s his second turnaround effort since taking over in 2021.
Given the bid’s small premium, Hugo Boss had told shareholders that it wasn’t a genuine takeover attempt but rather aimed at lifting Frasers’ holding. German law requires investors to make a takeover offer if their stake reaches 30%.
Hugo Boss’s second-quarter results didn’t signal a sustained strategic reset, making Frasers’ bid more compelling, according to Bloomberg Intelligence.
“We appreciate Frasers Group’s continued long-term commitment to Hugo Boss and look forward to maintaining a constructive relationship with them as our single largest shareholder,” Stephan Sturm, chairman of the German company’s supervisory board, said in a statement.
Frasers declined to comment on its plans for Hugo Boss. It can buy shares on the market to take its stake over 50%, but if it bought from another shareholder off market at a higher price than in its tender offer, Frasers would also need to pay investors who took up its original offer at that higher price.
Frasers typically doesn’t explain in detail why it invests in competitors, or why it takes an activist position in some but not all. Some analysts have said it’s part of an “elevation strategy” to cement relationships with suppliers by becoming an investor in their businesses. Frasers has long sold Hugo Boss products in its stores and online.
Though founded by Ashley, who controls more than two-thirds of the company, Frasers is now run by his son-in-law Michael Murray.
Last year, Murray joined Boss’s supervisory board, though Hugo Boss said he didn’t participate in any review or decision-making process relating to the offer to avoid potential conflicts of interest.
(Updates with share trading in fourth paragraph)
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