Mike Ashley looking for bargain buy at Debenhams

Mike Ashley’s Frasers Group confirmed today that it is in talks with the administrators of Debenhams to buy the business and rescue jobs at the stricken high street retailer.

Debenhams, which has 13 stores throughout the North West, is in the process of winding down its operations after Bury-based sports and athleisure retailer JD Sports pulled out of acquisition talks last week.

The business currently operates from 124 stores, employing around 12,000 staff.

But in a statement to the stock exchange today, Sports Direct owner Frasers Group confirmed reports over the weekend that it was back in for the chain.

It said: “The company confirms that it is in negotiations with the administrators of Debenhams’ UK business regarding a potential rescue transaction for Debenhams’ UK operations.

“Whilst Frasers Group hopes that a rescue package can be put in place and jobs saved, time is short and the position is further complicated by the recent administration of the Arcadia Group, Debenhams’ biggest concession holder.

“There is no certainty that any transaction will take place, particularly if discussions cannot be concluded swiftly.”

Debenhams started winding down operations the day after Arcadia was placed into administration. Several Arcadia brands operated as concessions within the Debenahams portfolio.

Frasers finance director, Chris Wootton, told the Sunday Times: “We have found that Debenhams has been overly reliant on Arcadia for many years, and with the administration of the Arcadia Group last week, as well as no end in sight to the outdated business rates regime which unduly punishes the likes of Debenhams, it may make this a bridge too far for the Frasers Group.”

It is believed administrators were looking for £300m for the Debenhams business.

Frasers Group is understood to be offering £200m, after reportedly having a recent £125m bid turned down.

Mike Ashley tried to buy Debenhams at the time of its original administration in April last year, but was again rejected by the administrators.

His original £150m shareholding in the chain was wiped out as a result of the administration.

Debenhams operates stores throughout the North West at Liverpool, Chester, Manchester, Trafford Centre Manchester, Preston, Blackpool, Bolton, Warrington, Bury, Oldham, Stockport, Barrow-in-Furness and Ellesmere Port, employing many hundreds of staff.

Russ Mould, investment director at Manchester-based investment platform AJ Bell, said: “To no great surprise retail kingpin Mike Ashley’s Frasers Group is in for Debenhams at the 11th hour.

“Ashley has been the great dealmaker of the high street in recent years and after JD Sports pulled out of its own deal for the department store it felt almost inevitable he would throw his hat into the ring.

“Having acquired another ailing chain in House of Fraser in 2018, you can see what Ashley’s playbook is likely to be with some store closures a relative certainty, perhaps even more so given House of Fraser and Debenhams stores will often sit cheek by jowl. He will also look to drive a hard bargain with landlords.

“Ashley might be interested in some of Debenhams’ in-house brands which he might then be able to sell in other outlets.

“The queues outside Debenhams since lockdown was lifted in England suggest the wider Debenhams name still resonates with shoppers although there was also likely an element of opportunistic bargain hunters inspired what they expected to be a big closing down sale.”

He added: “If the brand had that much appeal Debenhams, arguably, wouldn’t be in the mess it is now. It failed to adapt to the changing retail landscape and was left looking sluggish by its rivals.

“Obstacles to a deal remain, time is short and Frasers, itself, acknowledges the Arcadia administration process as an obstacle given it is/was the main concession holder in Debenhams stores.

“What seems likely is that the recent consolidation and failures in retail will not be the end of the story with the weaker players facing a big reckoning after a desperate attempt to salvage Christmas.”