Mulberry Group Plc has rejected a takeover approach from Mike Ashley’s Frasers Group Plc and said it’s confident its new CEO can turn around the British handbag maker.

In a move that sets the scene for a potentially heated takeover battle, Mulberry said the 130 pence-a-share offer from Frasers undervalues the company and does not have the support of Singapore’s Ong family, the majority shareholder of Mulberry.

The company’s stock fell more than 3 percent early Tuesday, adding to around a 40 percent decline in the past 12 months. Mulberry has been hit hard by the global slump in luxury spending and it reported a plunge in revenue for the latest fiscal year.

Mulberry said Tuesday that it has no intention of withdrawing a proposed £10 million ($13 million) share issue, which angered Frasers as it said it should have been given advance notice of the capital raising given it owns about 37 percent of the retailer.

The company said the recent appointment of Andrea Baldo, the former boss of Ganni, as CEO and a proposed share issue “provides the company with a solid platform to execute a turnaround and, ultimately, to deliver best value for all shareholders.”

Frasers, founded by the billionaire Mike Ashley, is known for its acquisitiveness and willingness to enter into boardroom battles to wrest control of companies. In the past it has had a number of high-profile battles with rivals including Debenhams and House of Fraser. The company is now run by Ashley’s son-in-law Michael Murray and has been growing its premium offering with upmarket outlet Flannels, as well as stakes in Mulberry and Hugo Boss.

“In the big scheme of British retail, this is small beer,” said Clive Black, research analyst at Shore Capital, but added that Mulberry could potentially benefit from Frasers’ single management team and balance sheet.

Mulberry said it recognised that Frasers is a “committed and important investor” and the board would engage with it on a pro rata participation in the capital raise.

Frasers has until Oct. 28 to either make a formal offer or walk away.

By Deirdre Hipwell and Jennifer Creery

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