Sports Direct seeks support for 拢61.4m Debenhams bid
Debenhams shares surge further as Mike Ashley reveals the price he would seek if he were to lead a takeover of the chain.
Wednesday 27 March 2019 17:32, UK
Sports Direct says it could make a 拢61.4m all-cash bid for crisis-hit Debenhams, but it would come with several conditions.
The sporting goods retailer controlled by Mike Ashley, which is the largest shareholder in Debenhams with 30% of the equity, said it would pay 5p per share for the stock it did not already own under its plans.
Sports Direct faces seeing its stake wiped out, along with those of other shareholders, under a restructuring plan being thrashed out by the Debenhams board which would see lenders take over.
Market analysts have suggested a takeover bid might be the only way for Mr Ashley to gain control because the department store chain has consistently rejected his own offers of a financial lifeline.
Sports Direct said: "The possible offer, if made, would represent a premium of approximately 127% to the closing price of Debenhams shares on 26 March 2019.
"In connection with the possible offer, Sports Direct would also assist Debenhams in addressing its immediate funding requirements (subject to the pre-conditions set out below).
"The possible offer is pre-conditional upon Debenhams immediately appointing Mr Mike Ashley as its CEO and terminating the noteholder consent solicitation process it announced on 22 March 2019."
That refers to Debenhams' plans to seek permission from the holders of its bonds to raise up to £200m.
Sports Direct said no firm offer could be made until Debenhams agreed not to enter any new funding arrangements or insolvency process.
Shares in Debenhams surged by 80% to above 4p-per-share when the market opened, before losing some of that ground. They ended the session at 2.8p - still 27% higher on the day.
There is no love lost between the Debenhams board and Mr Ashley.
It has questioned whether it is appropriate for the owner of House of Fraser to run its biggest rival, though he has pledged to leave his current role should he win the day.
Debenhams has also raised concerns that the timescale required for a takeover would not meet its urgent need to secure the company's financial future - badly damaged by a failure to compete online at a time of consumer caution and higher operating costs.
Mr Ashley has ambitions to turn House of Fraser into the "Harrods of the High St", but it is not clear if his plans would include a later merger with Debenhams - something that could attract the interest of competition regulators.
Neil Wilson, chief market analyst at Markets.com, said of the possible offer: "Investors don't quite know what to make of where things stand.
"Shares were quite volatile on the open, ranging from around 3.5p to 4.1p, but were last up 65% to 3.62p from yesterday's close of 1.58p, arguably suggesting investors think there's a roughly 50/50 chance the bid will succeed.
"Nothing yet from Debenhams but this rather looks like a serious offer which the board will have to consider, although we know they are taking great pains to do anything but accept help from Ashley."