Global shareholder advisory group steps in on boohoo-Frasers boardroom row

An international shareholder advisory group has stepped into the boardroom row between Manchester online fashion retailer, boohoo, and the Frasers Group.

Frasers, the biggest stakeholder in booho, with a 28.1% shareholding, wants to oust boohoo co-founder and executive chairman, Mahmud Kamani and install its nominees of Mike Ashley, the driver behind the hugely successful Sports Direct brand, and Mike Lennon.

Derbyshire-based Frasers has requisitioned a General Meeting, on December 20, to force through its demands.

But today (December 9), boohoo said it noted the voting recommendation from Institutional Shareholder Services Inc (ISS) to vote against the Frasers resolutions.

ISS was founded in 1985 and is an American proxy advisory firm.

Hedge funds, mutual funds and similar organisations that own shares of multiple companies pay ISS to advise – and often vote their shares – regarding shareholder votes.

ISS states that Frasers has offered a superficial view of performance and no specific plans for change and the two Frasers candidates, Mike Ashley and Mike Lennon, have real conflicts of interest, concluding that board change at boohoo group is not warranted.

Boohoo said this recommendation is in line with the unanimous recommendation of the company’s board which has previously outlined its reasoning to investors:

• The board has a credible plan to unlock and maximise value for the benefit of all shareholders through its Business Review and in Dan Finley as the right CEO to lead the business.
• Frasers appears intent on disrupting boohoo’s Business Review, destabilising the company and acting only in its own commercial self-interest. Frasers has prior history of this sort of corporate behaviour.
• Shareholders are being offered no protections in relation to the obvious risks presented by Frasers’ demands.
• Mike Ashley is conflicted and not a suitable appointment to the board.
• Mike Lennon is a practicing insolvency expert with a history of working closely with Frasers. Shareholders should ask themselves why Frasers would want him in situ at boohoo.
• The board is not deliberately seeking confrontation with Frasers, but will, at all times, act in the best interests of the company and all shareholders.

The General Meeting to vote on the resolutions will be held at the offices of Addleshaw Goddard, St Peter’s Square in Manchester, on December 20, 2024.

Tim Morris, boohoo Group chairman, said: “The board of boohoo welcomes the backing of ISS, which is in line with the recommendation we have made to reject the proposals from Frasers Group.

“We are clearly focused on doing what is right for all investors, following the launch of our Business Review to unlock and maximise shareholder value, the appointment of Dan Finley as our CEO and a successful fundraising.”

CEO, Dan Finley, said: “I believe that the group is fundamentally undervalued. There is no doubt that there is enormous opportunity for the group and I am determined to get back to being a disruptive and industry-leading business.

“Working with Tim, our independent non-executive chairman, overseen by our independent board, I am fully focused on creating maximum value for, and protecting the interests of, all shareholders.”

Dan Coatsworth, investment analyst at Manchester investment platform, AJ Bell, said: “Boohoo says it is not deliberately seeking confrontation with Frasers, yet this is more than just a simple war of words.

“Its battle against the Sports Direct retailer is being played out in the public domain for all to see. Each week brings a new form of attack from one side or the other, the latest being boohoo latching onto a recommendation from proxy adviser ISS to vote against Frasers’ quest to get Mike Ashley a seat on boohoo’s board.

“Recommendations from ISS or fellow proxy adviser, Glass Lewis, rarely form the backbone of an announcement to the stock market, but boohoo has seized upon ISS’s latest recommendation to launch another attack on Frasers.

“This follows comments at the weekend from Mike Ashley that boohoo must avoid a ‘fire sale’ of assets.”

He added: “The fate of boohoo will be in the hands of its shareholders when they vote on 20 December.

“At 35.88p, Boohoo’s share price is on its knees, trading at a fraction of the 400p+ level seen in 2020. Long-suffering shareholders might welcome someone of Ashley’s calibre joining the board and offering a different viewpoint to revive the business.

“Equally, some shareholders may not take kindly to his vulture-like tendencies and view a board appointment as a pre-cursor to Frasers muscling in and taking boohoo out on the cheap.

“What’s certain is that both parties are going to be working flat out over the next 11 days to get their viewpoint across and win over boohoo shareholders.”