An independent proxy adviser has warned shareholders at boohoo of the “obvious risks” presented by Frasers Group to the company.
Frasers, which owns 27% of boohoo’s shares, is seeking the appointment of its CEO Mike Ashley and Mike Lennon to the company’s board of directors alongside the removal of executive chairman and co-founder Mahmud Kamani.
However, Institutional Shareholder Services, an adviser to boohoo, has urged shareholders to reject Frasers’ proposals at a general meeting on 20th December.
The recommendations of proxy advisers can be crucial to the decisions taken by institutional investors in listed companies.
“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… board change at boohoo Group is not warranted,” stated ISS.
“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,” it warned.
“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.”
boohoo recently announced the appointment of Dan Finley as a successor to John Lyttle as CEO. It also installed Tim Morris as independent chair, with Kamani stepping into the role of executive vice chair.
Those moves followed a demand by Frasers that boohoo appoint Sports Direct supremo Ashley as CEO.
ISS added this morning: “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 has the right CEO to lead the business
“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.”
Morris responded: “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.”
Frasers has criticised the terms of boohoo’s latest £39.3 million fundraising deal while losses have tripled at the online fashion retailer.
However Finley added: “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.”
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Separately, three police forces are investigating claims that current and former executives at boohoo Group have been victims of stalking and surveillance.
Reports suggest that Kamani, Finley & Lyttle were targeted by multiple operatives trailing them on public transport, near their homes and outside its Manchester headquarters, with Lyttle’s decision to quit influenced by the situation.