Sports Direct considers cash offer for control of Debenhams

Mike Ashley blames landlords for the closure

Sports Direct says it is considering a hostile cash offer for fellow retailer Debenhams.

The news comes after almost a week of aggressive statement and counter-statement between the two companies, as Mike Ashley seeks to install himself as chief executive of the department store.

Debenhams has been trying to secure around £150-200m in finance to secure its future, while in the background, Shirebook-based Sports Direct has offered to fund the company – but only if Ashley is named CEO.

Now, it appears that Sports Direct is considering a wholesale takeover if the ailing department store.

In a statement to the London Stock Exchange on Monday evening, Sports Direct said: “In Sports Direct’s opinion, Debenhams restructuring and refinancing process is likely to result in an adverse outcome for Debenhams existing shareholders and, accordingly, Sports Direct confirms that, alongside other options, it is considering a possible offer for the entire issued and to be issued share capital of Debenhams not already held by Sports Direct.”

In response, Debenhams said this morning (26 March): “Any firm proposal from Sports Direct regarding an offer for the company will be given due consideration by the board. Given the timetable associated with any public offer, an offer for the company would not, in itself, address Debenhams’ immediate funding requirement. Therefore, the company will continue with its plan to obtain the funding required.”

Mike Ashley already owns almost 30% of Debenhams shares, but experts say their value is negligible.

John Colley, professor of practice at Warwick Business School, said: “Mike Ashley is aware his 29.9% shareholding has virtually no value and that is unlikely to change.

“What he wants is control. That is why he is now considering a fresh bid for the remaining shares.

“Debenhams will very likely end up either with a successful Company Voluntary Arrangement or a Receivership.

“Ashley can certainly see ways of extracting value but he wants to ensure he captures as much of that value as possible. That might include selling himself the better parts of the business such as Magasin du Nord.

“The current lenders might prefer not to see Mike Ashley looking after their interests, especially as he already has his hands full with House of Fraser.

“However, to avoid that they have to find £200m and fend over any further bid from Sports Direct. The behind the scenes negotiation will be very interesting.”

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