Mike Ashley has called for the fashion retailer Boohoo, where he holds a 27% ownership stake, to appoint him as its new chief executive in an open letter directed to its board.
Frasers Group, the retail entity controlled by Ashley, announced it would be requisitioning a general meeting of Boohoo to appoint not only Ashley as a director and CEO but also Mike Lennon, managing director at Kroll Advisory, as a director, with immediate effect.
The group described this move as a solution to what it labeled a “leadership crisis” at Boohoo. Last week, Boohoo disclosed that CEO John Lyttle would be departing from the troubled retailer after a five-year tenure.
Frasers Group asserted that Boohoo urgently needs to “address the management of its business” and pointed out the fashion retailer’s “abysmal performance and share price collapse.”
It highlighted that Boohoo’s sales had plummeted by 36.5% over the last three years, contrasting the half-year period ending on 31 August 2024 with the same timeframe in 2021. Additionally, its share price has declined over 29% this year, with approximately a 17% drop over the past three months.
Last week, Boohoo secured a £222 million debt refinancing agreement intended to facilitate its “next phase of development.” However, Frasers criticized the terms of the refinancing as “wholly unsatisfactory,” viewing it as a “step backward for the company and an appalling outcome for shareholders.”
The group claimed the new debt arrangement is “severely short dated, seemingly more expensive than the prior financing agreement, and almost undoubtedly places the company in a position requiring drastic corporate actions (such as disposals, deeper operational cuts, or closures) to repay the term loan due in ten months.”
It further stated: “Had Boohoo engaged constructively with Frasers on the refinancing, alternative solutions could have been fully explored that may have yielded a more favorable outcome for all stakeholders.”
The online fashion retailer disclosed last week its consideration of breaking up the business as it sought ways to “unlock and maximize shareholder value.” Frasers clarified: “Given our concerns about the refinancing and the imminent repayment deadline, we want to emphasize that no disposals should occur without consulting Frasers and all other significant shareholders.”
Frasers noted it had repeatedly attempted to engage with the Boohoo board on a variety of urgent matters affecting the company, including the board’s unwillingness to consider alternatives proposed by Frasers regarding the refinancing.
It complained about the “complete failure to meaningfully engage with us, your largest shareholder.”
Frasers revealed it had offered to nominate an “experienced individual” to the board on “multiple occasions” and had suggested appointing Ashley as director and CEO following Lyttle’s resignation when its advisers met with a Boohoo non-executive director last Friday.
Frasers expressed: “As of the date of this letter, we have not received a decision from the board regarding Mr. Ashley’s appointment. Instead, we have encountered holding responses that lead to additional delays in a situation where time is critical. Therefore, Frasers must assume that the board has rejected our proposal for board representation.
“In light of the board’s persistent failure to engage meaningfully on this matter…Frasers has been compelled to take action itself to address Boohoo’s leadership crisis.”
The owner of Sports Direct firmly asserted that these appointments are in the best interests of Boohoo, its shareholders, and stakeholders, stating they are the only way to chart a new course for Boohoo’s future, while urging the retailer’s shareholders to support its proposals.
Boohoo stated: “The Boohoo board is currently reviewing the content and validity of the requisitions with its advisers. A further announcement will be made in due course.”
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