Luxury handbag maker Mulberry has rejected a takeover approach from Mike Ashley’s Frasers Group valuing the firm at £83 million.

The struggling British fashion brand said it believes the possible offer from Frasers, which was revealed on Monday, “does not recognise the company’s substantial future potential value”.

Mulberry said it had discussed the approach with its majority shareholder, Singapore-based Challice, which is controlled by billionaire Ong Beng Seng and his wife Christina.

The Somerset-based firm put faith in its recently appointed chief executive Andrea Baldo to drive a turnaround and said it would also stick with the plans for a capital raising.

It said this “provides the company with a solid platform to execute a turnaround and, ultimately, to deliver best value for all Mulberry shareholders.”

Mulberry added: “In addition, the board has been informed that Challice is supportive of the company’s strategy and has no interest in supporting the possible offer.”

The company said it would instead look to hold talks with Frasers over a “pro rata participation” in the cash-call.

Frasers Group, which owns Sports Direct and already has a 37% stake in Mulberry, said on Monday it had put forward an approach worth 130p per share, valuing the stake in the company it does not own at £52.4 million.

It comes after Mulberry said on Friday that it needed to raise more than £10 million after slumping to a significant loss for the past year.

The luxury fashion firm reported a £34.1 million pre-tax loss for the year to March 31, compared with a £13.2 million profit a year earlier.

It has said sales dropped more sharply over the spring and summer, with group revenues plunging 18% over the past 25 weeks as wealthy shoppers reined in spending.

Within the accounts, Mulberry warned that the downturn has resulted in a “material uncertainty, which may cast significant doubt on the group and parent company’s ability to continue as a going concern” if its struggles continue.

Frasers said it was pushing to take control of Mulberry partly due to these concerns about the long-term viability of the business and to avoid Mulberry becoming “another Debenhams”.

The company said on Monday: “Frasers are exceptionally concerned by the audit opinion in the latest annual report released on Friday September 27 2024, which notes a ‘material uncertainty related to going concern’.

“As a 37% shareholder, Frasers will not accept another Debenhams situation where a perfectly viable business is run into administration.”

Mr Ashley held a stake of around £180 million in Debenhams before the historic retailer collapsed into administration in 2020, with his shareholding becoming almost worthless.

Mulberry was founded in Somerset in 1971 by Roger Saul and has celebrity fans including the Princess of Wales and Kate Moss.

The company is being led by Mr Baldo after the former Ganni chief executive replaced long-serving chief Thierry Andretta in a bid to drive improved performance.