Time for Ashley to put up or shut up
Tycoon given one last chance to make a bid for Debenhams
MIKE Ashley has been given a week to make a formal bid for Debenhams or face losing his entire investment in the company.
Ashley, 54, was backed into a corner after the department store secured a £200m lifeline from its lenders – leaving him with no option other than a takeover if he wants to stop his stake being wiped out.
The money has been divided into two tranches, with Debenhams getting £101m now and another £99m when its long-term future has been secured.
If the business is taken over by the Sports Direct boss – who already owns a 29.7pc stake – then this would satisfy the lenders’ demands.
But if he does nothing the department chain is likely to fall into pre-pack administration and will be seized by its lenders, rendering shareholders’ investments worthless. Ashley has until April 8 to make his move. Laith Khalaf, senior analyst at broker Hargreaves Lansdown, said: ‘Mike Ashley’s now between a rock and a hard place.
‘He faces either seeing his stake in Debenhams disappear or having to stump up cash to keep shares in the company alive.
‘If Sports Direct doesn’t want to pour good money after bad, the equity in Debenhams will almost certainly be wiped out, and the lenders will take control of the company.’
If Ashley seizes control, he will be required to pay off Debenhams’ £560m debt mountain.
Shares in the store jumped 29.1pc to 2.7p on hopes that he will make a bid.
The announcement that he has one last chance came just hours after the billionaire Newcastle United owner unleashed a furious tirade against Debenhams’ advisers for pursuing the deal.
He said: ‘I think that if there were any justice in the world the majority of the advisers would be put in prison.’ The refinancing will give Debenhams the headroom to press ahead with plans to close stores and seek rent reductions from landlords.
It also gives greater certainty to the future of Debenhams’ pension scheme, and was welcomed by its trustees.
Ashley has spent weeks trying to manoeuvre a power grab at Debenhams and has become increasingly frustrated with its management and the firm’s hedge fund lenders.
He wants a clearout of the board, except finance director Rachel Osborne. He believes he should be made chief executive of the business and is prepared to step down from the top job at Sports Direct to achieve that.
Ashley has already managed to get chairman Sir Ian Cheshire ousted from the business.
Chief executive Sergio Bucher was also kicked off the board, but still runs Debenhams.
A Sports Direct spokesman said it was considering its options.
Terry Duddy, chairman of Debenhams, said: ‘We are pleased to have agreed this comprehensive funding package, which secures the future of the Debenhams business and provides reassurance for employees, pension holders, suppliers, lenders and other stakeholders.
‘We have also preserved a route for our shareholders to participate in the future of the business, but this requires the support of our major shareholder.’
Duddy added: ‘ These actions are necessary to ensure the strongest possible platform to support the business.’