Inside Frasers Group Owner Mike Ashley’s Controversial Acquisition Strategy

In British retail, it’s becoming a question of which retailers Mike Ashley doesn’t have a stake in, rather than which ones he does.

The billionaire, known for his dealmaking and power drinking, has been snapping up shares in retailers including Asos Plc, Boohoo Group Plc, AO World Plc and Currys Plc all in the past couple of weeks. The moves came via Frasers Group Plc, the retail empire which Ashley originally founded back in the 1980s as Sports Direct.

It is the latest insight into the power that Ashley and Frasers wield over the UK retail sector, in which they have holdings totaling at least £295 million ($376 million), according to Bloomberg calculations.

Frasers holds nearly 10 percent of the voting rights in Currys and is also the biggest investor in the electrical retailer’s direct competitor AO World. The stake in AO World was bought from a fund set up by disgraced investor Crispin Odey, according to a person familiar with the matter.

Frasers is the second-largest shareholder in Mulberry Group Plc, which supplies luxury handbags to Flannels — an upmarket brand that Frasers also owns.

Earlier this year, Frasers bought The Mall shopping centre in Luton and is now landlord there to JD Sports Fashion Plc, a fierce rival of Sports Direct, among other retailers. It was the latest in a series of property deals by Frasers, which is now run by Ashley’s son-in-law Michael Murray after the billionaire founder officially stepped aside last year.

Opportunity Knocks

“Ashley has long looked at the high street like it’s his own personal game of Monopoly and just because he’s taken a back seat in the business of late doesn’t seem to have changed Frasers overall game plan,” said Danni Hewson, head of financial analysis at AJ Bell. “Find a business that’s a strategic fit to the overall retail empire and scoop up what you can, when you can, ready to pounce if opportunity knocks.”

Retail stocks are broadly trading at depressed levels, hit by a cost-of-living crisis that’s dented consumer appetite, offering tempting prices for investors. Over the years Ashley has bought House of Fraser, Jack Wills, Evans Cycles and Game. Last year, Frasers added Savile Row tailor Gieves & Hawkes and online businesses Missguided, Amara Living and Studio Retail Group along with increasing stakes in Hugo Boss AG and Asos.

Ashley’s record makes it difficult to predict how far a stake-building run will go, or what the end game might be. What starts off as small and seemingly innocuous holding, can sometimes grow into a major part of empire building, with some experts raising potential competition concerns.

“If you’re building up stakes in a number of competitors you can influence prices and a whole stack of things especially if you can talk to the board,” said Tim Cowen, a competition lawyer at Preiskel & Co. “If I was the CMA, I would want to take a look at it,” he said, in reference to the Competition and Markets Authority.

More than a decade ago, Ashley built up a stake in Blacks Leisure, a rival, and then blocked a rights issue and a rescue plan. Before department store Debenhams collapsed, Ashley built up a 30 percent holding, said the retailer’s advisers should be put in prison, and meddled enough that Ian Cheshire, chairman of the chain at the time, accused him of risking the interests of all shareholders.

Same Tactics

Around six years ago Ashley told a court that he was “not Obi-Wan Kenobi in charge of the death star” and rejected the image of him “sitting in a big office stroking a white cat” while making significant decisions. Frasers’ policy of taking punts on rivals seems largely unchanged since he handed over the reins to Murray and stepped down from the board last year.

Murray has consistently backed the strategy and recently spoke to Currys boss Alex Baldock to discuss synergies, according to a person familiar with the situation. Speaking to Bloomberg News earlier this year, Murray said he speaks to Ashley every day to bounce ideas off each other. “It’s me driving the car and him doing the detail on the back end,” he said at the time.

It was Ashley, however, who met Mulberry’s senior management to seek a voice in the boardroom last month, according to a separate person familiar with the matter. Ashley pushed for a seat on the board at the luxury brand.

“Big Mike is definitely still involved,” said Kate Calvert, retail analyst at Investec. “Look at the actions that are happening. We’ve seen it in other businesses before. He’s using quite a lot of the same tactics.”

Ashley has grown his Asos stake to 10.6 percent, up from around 5 percent in October. He’s the third-largest shareholder behind Danish billionaire Anders Povlsen and US hedge fund Camelot Capital Partners LLP, and with speculation of a takeover bid for Asos, the stage is set for a battle for ownership.

Synergies

Frasers has also taken a 5 percent stake in rival Boohoo and said it sees “potential synergies” with the chance to strengthen Frasers brands like I Saw It First and Missguided.

“Ashley has always been opportunistic,” said Richard Hyman, a partner at advisory firm Thought Provoking Consulting. “Sometimes it’s a bit of a flutter that appears to have a strategic rationale.”

Earlier this year Ashley ramped up bets using put options that Frasers stock price would rise above 800 pence by September. The share price is currently at 704 pence. Remuneration at Frasers is also set with share price goals in mind. Murray could get a £100 million bonus if the shares reach £15 and stay at or above that level for 30 straight days by October 2025.

Ashley previously said that although everyone thinks he should sell out and “go off to the beach” it doesn’t appeal to him. “I’m a person who spends 90 percent of my time looking forward,” he said during a court case against a former banker and colleague in 2017. “I don’t drive the car through the rear-view mirror.”

Frasers declined to comment for this article. A representative for Ashley did not respond to a request for comment.

By Lisa Pham and Katie Linsell

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Ashley’s Frasers Group Raises Stakes in Hugo Boss, Asos

Frasers said it now has a strategic stake of 32.8 percent in Hugo Boss, mostly held through indirect put options, valued at €960 million ($945 million). That’s up from €900 million in June.