UK's Frasers proposes Mulberry takeover to avoid 'another Debenhams'

(Reuters) -British sportswear and apparel retailer Frasers has proposed a possible 83 million pound ($111 million) takeover of struggling luxury brand Mulberry, saying it wants to avoid "another Debenhams situation".

Department store Debenhams, which Frasers had invested 150 million pounds in, went out of business in 2021.

Frasers is a Mulberry shareholder and its move on Monday follows Mulberry's announcement on Friday of a proposed 10 million pound subscription of shares by Challice, Mulberry's Singaporean backer and 56% shareholder, to prop up the Mulberry balance sheet. Mulberry also reported a 22.6 million pound pretax annual loss.

"As a 37% shareholder, Frasers will not accept another Debenhams situation where a perfectly viable business is run into administration," Frasers said.

Mulberry's shares were up 6% at 125 pence in late morning trading.

Frasers, controlled by Mike Ashley, said it would have been willing to underwrite the subscription in its entirety, potentially on better terms for Mulberry.

Frasers' possible offer is pitched at 130 pence a share, a 30% premium to the subscription price, implying a valuation of 83 million pounds, or 52.4 million pounds for the shares Frasers does not own.

The possible offer is subject to Mulberry board's recommendation and the withdrawal of the subscription offer.

Mulberry has not yet responded to Frasers' announcement.

Under UK takeover rules, Frasers has until Oct. 28 to make a firm offer for Mulberry or walk away.

($1 = 0.7467 pounds)

(Reporting by James Davey in London and Prerna Bedi in Bengaluru; Editing by Sonia Cheema and Susan Fenton)