Ashley’s £15 MILLION bar bill
HE says deal talk was just drink-fuelled ‘banter’. RIVAL insists it was all for real. Now a (very sober) judge will rule on . . .
MIKE Ashley, the billionaire boss of retailer Sports Direct, faces court action this week over an alleged multi-million pound deal hatched during an alcohol-fuelled meeting in a London pub.
He is being sued by former Merrill Lynch banker Jeff Blue, who claims the tycoon agreed to pay him £15million if he could help make Sports Direct ‘as valuable as Marks & Spencer’.
Ashley is defending the case, due to start in the High Court on Thursday. In his defence he describes the meeting as ‘an excessive drinking session’ involving ‘a degree of theatrical role play’ and ‘banter’.
He denies the deal described by Blue was agreed.
Blue claims the discussion over his bonus payment took place ‘before any significant quantities of alcohol had been consumed’. His claim also cites the general culture at Sports Direct in which Ashley frequently conducted serious business in informal surroundings and while drinking.
‘Ashley often conducts business, discussions and concludes business agreements orally and informally, including while consuming alcohol,’ according to the papers filed in court by Blue’s firm of lawyers, Mishcon de Reya.
The claim describes a weekly senior management meeting held every Tuesday at the Lion Hotel in Worksop, about half an hour’s drive from Sports Direct’s head office in Shirebrook, Derbyshire. The meeting ‘typically commenced in the bar area at around 8pm with Mr Ashley drinking alcohol at the bar while in discussions with the [Sports Direct] management’. Dinner would then be served at around 10.30pm, with the meeting ‘typically concluding between 1am and 3am’. ‘Ashley made decisions at those meetings having consumed alcohol and sometimes considerable amounts of alcohol,’ the court papers claim.
At the centre of Blue’s claim for £15million is an evening he spent with Ashley at the Horse and Groom pub in Central London in January 2013 with witnesses present. Blue claims that during the evening, Ashley agreed to pay him £15 million if Sports Direct’s shares hit £8, a price that would value the group at more than £4billion.
He said the deal was based on the understanding that, as a former Merrill Lynch director, he could improve the company’s relationship with the City and help attract institutional investors and better coverage from brokers.
However, despite the share price hitting this level just over a year later, Blue claims he has received only £1 million from Ashley.
The meeting at the heart of London’s rag trade district was a crucial one with Peter Tracey, head of corporate broking at Espirito Santo Investment Bank, says Blue, who agreed to provide Sports Direct with broking services only weeks later.
Simon McEvoy, head of market making at Espirito Santo, and his colleague Russell Clifton from the same department were also there. The bankers also contributed to the flow of the discussion which led to the agreement, Blue claims.
It had been set up by Blue as part of a plan to boost the firm’s reputation in the City, he claims.
After meeting at Sports Direct offices in New Cavendish Street, the group continued directly to the pub nearby.
According to Blue’s claim, one of the bankers visited the toilets and when he returned told Ashley: ‘Look Mike, I’ve given this some more thought. Given how much money you stand to make, if Jeff can get the stock to £8 per share, you should really pay him £20 million.’
According to the claim, Ashley then said: ‘Let’s split the difference and call it £15million if the stock gets to £8 per share in the next three years.’
Sports Direct, majority owned by founder Ashley, was promoted into the FTSE 100 in September the same year. As the share price approached £8, Blue says the agreement was discussed again and acknowledged by Ashley.
The stock closed above £8 for the first time ever in February 2014.
Blue’s legal claim goes on to state that Ashley acknowledged the previous agreement, but tried to change its terms. Blue claims Ashley told him: ‘It won’t surprise you to know I am going to renegotiate our deal.’
Ashley suggested Blue became finance director, which would entitle him to a potential share payout of £8.2million the following year and a salary of £150,000.
Ashley offered to lend Blue £750,000 to cover any cash flow issues he might have in the interim and another £750,000 when the bonus was paid. But Blue denies any new agreement was reached.
In May 2014, £1million was transferred to Blue. Ashley denies this was connected to the alleged first agreement and asserts it was a ‘discretionary one-off bonus’.
The documents indicate Blue’s personal advisory firm was being paid £12,500 a month plus VAT for three days a week.
Blue concedes he had an existing services contract with Sports Direct but says his efforts to boost the share price were over and above the terms of that contract.