New Frasers salvo at boohoo demands ‘Kamani must go’

Mahmud Kamani, executive chairman and co-founder of Manchester-based online retailer, boohoo, is in the crosshairs of Mike Ashley’s Frasers Group.

The Derbyshire retail group, which includes Sports Direct and is the majority stakeholder in boohoo with a 28.1% shareholding, today demands that Kamani must go, in a wide-ranging shake-up of the business, which has seen its market capitalisation decline over recent years.

In an open letter to boohoo shareholders, Frasers asks them: “A simple choice: win with Mr Ashley or lose with Mr Kamani”.

Last month Frasers called for Ashley  and Mike Lennon, of Frasers, to be installed on the boohoo board, replacing the then CEO John Lyttle, who had already announced his intention to step down.

Boohoo rejected the demand, installing internal appointment, Dan Finley, as CEO in a blatant snub. It has called a General Meeting for December 20, and urged shareholders to ignore Frasers’ demands.

Today, Frasers is calling for a separate meeting, saying: “Recent events at boohoo should leave shareholders in no doubt – Mahmud Kamani must go.”

In the letter to boohoo shareholders, Frasers says Kamani is synonymous with a “multi-year share price collapse and value destruction – the shares are 93% off their highs, an abysmal trading performance, dismal financial results, further supply chain allegations, a sustained track record of governance failures and a ‘back pocket’ board, related-party cronyism, ill-judged, value-destroying capital investment, and a total disregard for the shareholders”.

It says a recent £222m refinancing has put a straitjacket around boohoo’s ability to manage its issues, adding: “Boohoo is not making money, its performance is trending in one direction at an alarming rate, it cannot invest and so, without change at the top, only disposals will stop boohoo from defaulting on its debts.

“The short-term nature of the debt means that without this change, forced disposals are the only option, which will lose value for all shareholders.”

It said installing Ashley and Lennon to the board will “lead the drive to return boohoo to profitability. Since 2016, Frasers has more than doubled its profits and Mr Ashley plans to bring this same success to boohoo.”

It said the current boohoo board’s record is a “performance history to be ashamed of”.

The letter says: “Analysing their individual track records, each one of these directors has lost shareholders money based on the annualised return from all previous directorships. On average, this group of directors collectively lose shareholders over 19% of their investment for every year they are involved based on all previous directorships.”

Frasers says boohoo’s response to its initial request resulted in “a number of desperate and baseless claims against Frasers, Mr Ashley and Mr Lennon” by its board.

It adds: “It is clear that the board is clutching at straws in its attempt to try to find reasons not to appoint Mr Ashley and Mr Lennon to the board.

“We ask you, our fellow shareholders to consider this: is the board, and in particular Mr Kamani, worried about what Mr Ashley and Mr Lennon will find?”

It concludes: “Shareholders have lost money and there is justified disappointment with and distrust of the current leadership, in particular, Mr Kamani.

“With the appointment of Mr Ashley and Mr Lennon, boohoo has the potential to become a valuable and profitable business. Boohoo urgently needs a reset, and the upcoming Shareholder Meeting is your opportunity finally to unlock the company’s incredible potential.

“Join us in helping boohoo get back on track. Vote in favour of the proposed resolutions at the Shareholder Meeting.”

In a separate announcement this morning, boohoo said it has appointed Tim Morris as its independent chair with immediate effect, while Mahmud Kamani will become executive vice chair with immediate effect.

It said: “The board has decided to divide the role between his executive capacity and his role as the board’s chair, to enable the company to have an independent chair and allow Mahmud to continue his day to day executive role.

“Mahmud is an integral part of the leadership team and is currently focused on the group’s young fashion businesses. Alistair McGeorge will remain as senior independent director, adding further independence to the board.”

Today’s announcement added: “In connection with Tim’s appointment as chair, Mahmud Kamani has also reconfirmed his agreement to provide assurances around his relationship with the company as a major shareholder, for the benefit of all shareholders.”

Tim Morris said: “My appointment follows a series of decisive steps taken by the board since launching its business review, including the completion of the refinancing, the appointment of Dan Finley as our new CEO and the successful fundraising.

“I am excited to lead boohoo through the next phase of its development, alongside Dan and the wider board, with the focus on delivering maximum value for, and protecting the interests of, all shareholders.”

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “There is more drama between boohoo and Frasers than a week’s worth of Eastenders.

“Having failed in its previous attempt to make Mike Ashley chief executive of the clothing company, Frasers has now used its shareholder muscle to call for a vote on kicking out boohoo’s co-founder, Mahmud Kamani, and appoint Ashley and Mike Lennon, an insolvency expert, as directors.

“Frasers’ letter to boohoo doesn’t mince its words. Accusing Kamani as leading a ‘back pocket’ board that has ‘total disregard’ for shareholders implies that Frasers has reached the end of its tether. It’s gone hostile and is determined to take charge and breathe new life into boohoo.

“However, a mere one per cent increase in boohoo’s share price on the news implies that investors aren’t convinced the Frasers empire will win this battle.”

He added: “Kamani is unlikely to bow to Frasers’ demands and leave without a fight. After all, he helped to build the business and make it one of the country’s biggest forces in fast fashion.

“While boohoo has lost its way in recent years, it’s unfathomable that Kamani will let someone else step in and reassemble the business in a different way. It would be an admission of failure.

“Interestingly, Frasers’ open letter coincided with the news that Kamani will move from executive chair to executive vice chair. Tim Morris becomes independent chair. That may not be enough to pacify Frasers in its quest for change.”