Mike Ashley gatecrashes Debenhams debt plan with £61 million bid approach

MIKE ASHLEY’S Sports Direct on Wednesday made a £61.4 million approach for struggling Debenhams in its latest attempt to derail the department store’s rescue refinancing.

Sports Direct, the largest shareholder in Debenhams, is prepared to offer 5p a share for the crisis-hit firm if it agrees to conditions including Ashley becoming chief executive and dropping its current refinancing plans. The potential offer is a fraction of its £1.7 billion valuation when it returned to the stock market in 2006 after controversial private equity ownership.

Debenhams is seeking £200 million from its lenders, including Barclays, HSBC and Bank of Ireland. As part of the plan existing investors including Sports Direct could be wiped out, and the chain forced to shut far more than the current 50 shops earmarked for closure. The retailer could also enter a “pre-pack” administration, which could see Debenhams change hands. Securing the capital and cutting its £560 million debts are vital for survival.

Sports Direct finance chief Chris Wootton said last night shareholders have been “ignored, cast aside and trampled underfoot” by Debenhams and its top brass is allowing “critical stakeholders to be wiped out”.

Wednesday’s move is the latest in the tug-of-war for control of Debenhams. Sports Direct has made several offers, on Monday saying its options were superior to “multiple insolvency processes”.

Debenhams said Sports Direct’s most recent offer to pay £100 million for its Danish business did “not address the company’s funding and restructuring requirement”. The sportswear seller last year told Debenhams not to sell the asset for less than £200 million when it put the division up for sale.

This month Debenhams issued a fresh profit warning. Recent trading has been disappointing with same-store sales down 5.3% for the six months to March 26, but online sales were a bright spot.

Global Data retail analyst Patrick O’Brien said: “While Mike Ashley’s desire to buy Debenhams and merge it with House of Fraser [which it also owns] is clear, his talk of a £61 million offer, without actually making one, is hard to take too seriously. We do not believe that he would make a formal offer unless he was sure there was a way to avoid being on the hook for all of it – there are ‘change of control’ clauses in Debenhams debts that would make them immediately repayable.”

Hedge fund tycoon Crispin Odey on Wednesday revealed he has a 5.2% stake in Debenhams, as well as a 7.9% short position. Debenhams, valued at £40 million, saw shares go up 50%, or 1p, to 3.3p, while Sports Direct rose 0.5p to 287p.

Findel’s warning

The top brass of shopping website Findel on Wednesday told shareholders to reject Sports Direct’s “opportunistic” £140 million takeover offer.