Sports Direct boss seeks to prevent lender takeover that would wipe out his stake
Mike Ashley has offered to underwrite a £150m shareholder rescue fundraising for Debenhams if the ailing department store chain agrees to make him chief executive.
The offer is the Sports Direct boss’s latest attempt to prevent Debenhamsbeing taken over by its lenders and wiping out his group’s near 30% stake, which he spent about £150m building.
Debenhams set Ashley a deadline of Monday night to make a bid for the company, put in new funds or see lenders take control of the department store’s equity via a pre-pack administration deal.
The latest offer from Ashley could give him a majority stake in Debenhams if other investors do not participate in the rescue rights issue.
The deal would be structured so that stores would continue to trade without affecting shoppers or suppliers but shareholders’ stakes would be rendered worthless.
It also includes plans to close about 30% of Debenhams’ 165 stores via another insolvency procedure known as a company voluntary arrangement.
The billionaire, who bought House of Fraser out of administration last year, believes that together the two department store chains could be turned into a far better business.
Debenhams last month agreed £101m of immediate new money from its lenders, £40m of which would replace a short-term loan taken out last month. A further £99m is subject to Ashley’s sports retail group agreeing to either a firm offer for the company, including refinancing all its debts and providing new working capital, or the provision of a minimum of £200m in new funds via a loan or participation in a rights issue.
Debenhams has said the second tranche of cash would not be forthcoming unless Ashley cancelled a call for a shareholder meeting, at which he wants to oust all but one of the board and install himself as chief executive.
Ashley has attacked advisers to the department store group, claiming they should be jailed, after Debenhams shrugged off a possible £61.4m takeover bid from Sports Direct in favour of pressing ahead with its rescue funding plan.
The department store chain, which has been losing customers and sales at a drastic rate, said that if Sports Direct did not agree to provide new funding, ownership by the group’s lenders would be the best way to ensure “stability and continuity of trading”. The group acknowledged its shareholders would be wiped out but said the arrangement would be best for the business, its customers, employees and suppliers.
Debenhams has been battered by tough trading conditions on the traditional high street, beset by higher costs and the effect of shoppers moving online, and simultaneously has been struggling with a huge debt pile.
Debenhams declined to comment. Sports Direct has been contacted for comment.
The Guardian
Leave a comment