Investing.com -- Boohoo (LON:BOOH)'s board has urged its shareholders to reject a leadership challenge from its largest shareholder, Frasers (LON:FRAS), citing concerns about potential conflicts of interest and the risks of allowing Frasers to exert greater influence over the company, sending Frasers stock down over 2%.
In a statement, Boohoo stated its belief that Frasers and its owner, Mike Ashley, were attempting to disrupt Boohoo's ongoing Business Review, which was announced in October 2024, and were acting solely in their own commercial self-interest.
As per Boohoo, Frasers, which holds a 73% stake in the company, has sought to apply pressure on Boohoo's management, potentially with the ulterior motive of acquiring the company's assets at a price below their market value.
The board also said that Frasers' actions were not driven by an alternative credible plan for Boohoo’s future but rather by a desire to exert control for its own benefit.
The board's concerns were underscored by a reference to Frasers' previous actions with Studio Retail Group, where it used its substantial shareholding to push for board changes, ultimately acquiring the business out of administration for a fraction of its value.
The board stressed that, in the wake of Boohoo's refinancing, it had a clear and credible plan to unlock value for all shareholders and was fully committed to delivering on this strategy.
The company’s leadership also pointed to the appointment of Dan Finley as CEO, describing him as a capable and dynamic leader who has long been identified as the successor to the previous CEO.
The board was unanimous in supporting Finley’s appointment, citing his experience leading Debenhams and his leadership skills as integral to driving Boohoo’s strategy forward.
In its response to Frasers, Boohoo's board also flagged the importance of corporate governance and the need to avoid potential conflicts of interest, particularly if Mike Ashley were to be granted a position on the Boohoo board.
The board expressed concern that Ashley’s involvement would be detrimental, given his significant control over Frasers and the competitive relationship between the two companies.
They pointed out that Ashley’s past actions and Frasers’ approach to other businesses suggested that his presence on the board could harm Boohoo's interests and those of its shareholders.
Moreover, Boohoo rejected Frasers' demand to appoint Mike Lennon, a restructuring expert with ties to Frasers, to the board. The company questioned the motives behind Frasers’ push for Lennon’s appointment, noting that Lennon had previously worked on several administration processes for businesses that Frasers had acquired.
The board argued that such a move would not align with the interests of Boohoo and its shareholders, casting doubt on Lennon’s suitability for the role.
Despite these challenges, Boohoo's board made it clear that it was not seeking confrontation with Frasers but was instead focused on safeguarding the long-term interests of the company and all its shareholders.
The company has repeatedly sought to engage with Frasers in a constructive manner, offering the possibility of a non-executive director role for Frasers while requesting safeguards to address potential conflicts of interest.