Mike Ashley bought a £60mn stake in Next and no one noticed
Registry data reveals that Frasers, the Sports Direct owner, has taken a punt on Britain’s biggest frock shop
Mike Ashley is on a mission. His company Frasers has this month made numerous “strategic investments” in listed rivals including Asos, Boohoo, Currys and AO World. The shopping spree adds to an investment portfolio that already included minority stakes in Hugo Boss, Mulberry and N Brown.
Here’s another name for the list: Next, Britain’s biggest retailer by market value.
Frasers last year bought 1mn Next shares with a value at the time of approximately £60mn, according to data compiled by Argus Vickers, a specialist shareholding analysis service. Its data also shows that, between the end of March and mid May of 2023, Frasers then halved the Next stake to 500,000 shares.
As far as we can see, Frasers’ investment in Next has never been reported. That’s in spite of Argus Vickers-supplied shareholder data being available (uncredited) on every Bloomberg terminal for more than a year.
Asked about the investment in Next, Frasers said it had not made any regulatory filing to that effect and declined to comment further. A Next spokesman said he couldn’t give a definite answer on whether or not Frasers was a shareholder.
Half a million Next shares carry a current value of £33.6mn but are equivalent to just 0.39 per cent of the total stock in issue, so don’t require a statement to the market. Shareholdings in London-listed companies need to be disclosed only at 3 per cent of total voting rights when the issuer is UK incorporated, or at 5 per cent for offshore issuers.
So, rather than rely on regulatory filings, Argus Vickers uses the more granular corporate holdings registers that are required by the Companies Act 2006, Section 808, but are viewable only by request. Gianluigi La Salvia, head of analytics and general manager at Argus Vickers, confirmed to Alphaville that it had supplied the data to Bloomberg showing Frasers was a Next shareholder.
Ashley remains majority owner of Frasers, having two years ago handed control of the business he founded to his son-in-law Michael Murray. The company said this week that strategic investments remain “a core part of Frasers’ DNA”:
Under [CEO] Murray’s leadership, we continue to build on our long track record of establishing supportive shareholder positions in attractive retail companies. We have a clear strategy to identify opportunities to invest in businesses which complement our existing sport, premium and luxury businesses, or help us to build and further utilise our sector-leading ecosystem.
The Next investment looks more like a punt than a way to utilise a sector-leading ecosystem, however. Between the initial purchase and its partial sale earlier this year, Next shares rallied by approximately 15 per cent.
In that way the trade has brings to mind of previous episodes when Frasers (née Sports Direct) appeared to be a vehicle for Ashley to play the markets — such as in 2014 when it took a put option in Tesco. How other shareholders have benefited from these speculative gambles is not always obvious.
Frasers’ investment portfolio of minority stakes and derivatives has a notional value of £1.9bn, or 56 per cent of the group’s market cap.
Taken at face value, this suggests the core business — which includes brands such as Evans Cycles, Game, Flannels, Missguided, USC and Sofa.com as well as House of Fraser and Sports Direct — is trading at just three times current year earnings. Frasers’ closest peer on the UK market, JD Sports, trades at 53 times earnings.
The recent shopping spree might also raise concerns about cross-ownership and antitrust. Academic research finds that by taking minority stakes in rivals a company can encourage tacit collusion, vote to vandalise strategy and take advantage of sensitive competitive information that becomes harder to keep secret.
In the UK, presumption of material influence applies automatically only when a passive shareholding hits 25 per cent. BSkyB’s forced sale of ITV shares in 2010 moved the bar to 17.9 per cent — though the more relevant precedent for Frasers might be Ashley’s free pass from UK regulators in the same year when he built a 28 per cent stake in Blacks Leisure, a rival supplier of camping goods. Ashley then rejected Blacks’ rescue rights issue the ejected its chair as the company hurtled towards administration in 2012.
Whatever the motive behind its more recent dealings they are unlikely to change a perception that, whoever he puts in charge of Frasers, Ashley will continue to do whatever he wants.