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Frasers Snubbed and Joules Needs ‘Hail Mary’

Mergers and acquisitions (M&A) activity seems to be slowing down as buyers and seller reassess the economic landscape.

At an S&P Global Markets Intelligence webinar on mergers and acquisitions Tuesday, participants in a panel discussion noted that deal activity has slowed for a number of reasons ranging from surging inflation to rising interest rates and ongoing political uncertainty. The consensus was that lower equity values usually make sellers think twice because they don’t want to sell at reduced prices, while buyers are reluctant to pull the trigger when the economic outlook is unclear.

MySale rejects Frasers Group offer

Frasers Group got snubbed by MySale Group PLC.

Australian online fashion marketplace MySale has rejected a 13.6 million pound ($16.2 million) cash offer from Frasers Group for the shares it didn’t already own. The marketplace platform said the offer price undervalued MySales and failed to reflect an “adequate value or premium.” Frasers, which acquired its initial 28.7 percent stake in the Australian-based firm in June, said it wouldn’t increase its offer.

Separately, former Frasers CEO Mike Ashley is set to step down from the board on Oct. 19. He vacated the CEO post in May, and was succeeded by Michael Murray. Ashley founded Sports Direct International, which changed its name to Frasers Group three years ago after acquiring House of Fraser in August 2018 when the latter entered administration.

Joules could use a “Hail Mary”

Joules, no longer in talks regarding an equity stake from Next Plc, needs to find another way to get out from under its liquidity problems. The fashion and home lifestyle brand said it is still in discussions with Next to start running on the Next Total Platform.

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“The Company has an ongoing positive relationship with Next, successfully selling Joules products through Next’s Label channel which will continue,” Joules said in a statement earlier this month. It “continues to assess its ongoing financing requirements and is considering alternative options, including a possible equity raise, to allow the company to strengthen its balance sheet.”

Joules in July called in KPMG’s debt advisory experts to help it build up a cash cushion. The net debt at the end of July was 21.1 million pounds ($24.3 million). Problems first surfaced in May when Joules reported a decline in full-price selling. Last month, Joules said sales for the five weeks ended Aug. 14 “softened materially,” citing warm weather reducing demand for outerwear, rainwear, knitwear and wellies. Retail sales in the first 11 weeks of the current financial year are down 8 percent year-on-year, it added.

And while the retailer said it continues to develop and execute its strategy and turnaround plan—which includes focusing on driving higher profitability through a better pricing and promotional strategy and bringing in more profitable product categories with shorter time to market—it won’t help much if inflation continues curbing consumer demand.

Jonathon Brown, Joules Group’s new CEO and non-executive director, said founder Tom Joule will lead the company’s product development process for the upcoming seasons.

Next now majority owner of Reiss

Next Plc has acquired an additional 26 percent interest in Reiss, giving it control of the British fashion retailer at 51 percent.

Next acquired its initial 25 percent in Reiss in March 2021 in a transaction that also gave it the option through July 2022 to add to its stake. That option is believed to have been exercised in April before the recent M&A slowdown, but wasn’t publicly disclosed until last month, local media reported. While Reiss operates as a standalone business, its digital operations run on Next’s Total Platform. Unlike others that have been struggling, upscale Reiss is believed to be doing well.

In recent years, Next has taken an interest in brands that resonate with consumers where the company can add value through access to its Total Platform services infrastructure. Next CEO Lord Simon Adam Wolfson has said that the company “has followed the money” over the years in what he described as a “business evolution in the true sense of the word.” And he believes that retail stores will remain at a disadvantage to online competition, mostly because of the scale of choice that websites can offer.