‘Mike Ashley considering Debenhams and House of Fraser merger’
DEBENHAMS’ shares have been boosted by rumours that retail boss Mike Ashley might merge it with rival department store House of Fraser.
Mr Ashley, who is the founder and chief executive of Sports Direct, announced on Friday that he was buying House of Fraser out of administration for £90m.
The news has sparked speculation that the retail tycoon might also swoop on Debenhams, which has issued a number of profit warnings this year, and combine it with House of Fraser.
Mr Ashley owns just under 30% of Debenhams’ issued share capital, close to the threshold at which he must launch an official takeover bid.
Neil Wilson, chief market analyst at Markets.com, said: “The rally in Debenhams’ shares is a clear indication the market believes Sport Direct could be ready to pounce.
“A move to effectively consolidate the two troubled department store chains into a single offering looks to be the only viable solution to their problems.
“Combining the operations to reduce overheads and stop competing against each other will prove beneficial.”
Debenhams’ shares jumped 13% in morning trading on Tuesday, before paring back gains in the afternoon, when they were up 4.3% at 13.3p.
Since Mr Ashley’s takeover of House of Fraser was announced, Debenhams’ shares have risen by close to 15%.
Sports Direct said last month that it had taken an £85m hit on its stake in Debenhams due its series of profit warnings.
The retail chain blamed the write-down for dragging on fullyear profits, which fell by 72.5% to £77.5m.
The company also has strategic investments in Game Digital, French Connection and Goals Soccer Centres.
Mr Ashley has promised to save around 47 of House of Fraser’s 59 stores in his buyout of the chain.
However, it is unclear whether this applies to the two House of Fraser stores in Wales in Cardiff and Newport.
Under previous plans before the deal with Mr Ashley, the two stores were earmarked for closure.