Fast-fashion retailer Boohoo has won the support of an influential shareholder adviser in its battle to prevent Sports Direct founder Mike Ashley wresting control of the company.
Boohoo on Monday published the recommendation of Institutional Shareholder Services (ISS) that investors vote against Ashley and another associate joining its board at a meeting on 20 December.
Ashley had sought to become chief executive of Boohoo but was blocked by the company from putting that proposal to shareholders. He now says he will “work collaboratively” with the boss Dan Finley if he wins a board post and convene a further meeting to oust Boohoo’s founder and chair, Mahmud Kamani.
Ashley has made Boohoo the latest in a long line of targets for his corporate empire. Ashley made his fortune with Sports Direct, but has expanded far beyond trainers and tracksuits through a long string of acquisitions of clothing retailers ranging from House of Fraser to Flannels and Evans Cycles under the London-listed Frasers Group.
Boohoo has become a target after its value cratered by more than 90% from its peak during the Covid-19 pandemic. A surge of online shopping during lockdowns inflated a bubble in internet retailers, only for it to burst as spending moved back to the high street. Boohoo and other British rivals such as Asos have come under particular pressure from Chinese competitors led by Shein, who gained market share by supplying the latest trends more cheaply, direct from factories.
Dan Finley, Boohoo’s chief executive, said: “I believe that the group is fundamentally undervalued. There is no doubt that there is enormous opportunity for the group and I am determined to get back to being a disruptive and industry-leading business.”
Boohoo argues that Ashley is seeking to disrupt Boohoo’s turnaround efforts, “destabilising the company and acting only in its own commercial self-interest”.
According to Boohoo, ISS said “Frasers has offered a superficial view of performance and no specific plans for change and the two Frasers candidates, Mike Ashley and Mike Lennon, have real conflicts of interest.” It concluded that changing Boohoo’s board was not warranted.
Ashley’s Mash Holdings owns 28% of the shares in Boohoo, which was founded in Manchester in 2006 by Kamani, who still serves as executive director. Boohoo defied Ashley last month by replacing former chief executive John Lyttle with Finley, who had led the Debenhams brand under Boohoo’s ownership.
Ashley lost out to Boohoo when it bought the Debenhams brand in 2021 after the department store’s collapse. He has mounted his own campaign to persuade Boohoo shareholders to back him. In a letter to Boohoo investors he accused Kamani of being “egotistical” and said the board had left a “catastrophic mess” through “panic-driven mismanagement resulting in reckless decisions”.
In a statement in response to the ISS report, Frasers said Ashley’s intention was to prevent any “fire-sale of assets”.
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A spokesperson for Ashley’s Frasers Group said: “Mr Ashley set out clearly in his letter of 8 December his determination to work on behalf of all Boohoo shareholders and support Dan Finley to deliver on the opportunities to turn around the fortunes of the group and restore shareholder value.
“He has been very clear he would not want Debenhams sold or any fire-sale of assets and has put on record his commitment to transparency and shareholder consultation, something badly missing under the current board.”
However, Frasers itself is under scrutiny from investors as it dropped from the FTSE 100 last week and issued a profit warning amid questions over multiple takeover moves including a failed effort to take control of the luxury brand Mulberry and the recent acquisitions of the German sports retailer SportScheck and the struggling Norwegian sports chain XXL.
Nick Bubb, a retail analyst, said: “If Frasers wanted to reassure investors, after Thursday’s profit warning, that management aren’t being distracted by all the corporate [merger and acquisition] moves, it probably wasn’t a good idea to announce a bid for a loss-making Norwegian sports chain on Friday morning.”
