Activist will have battle on its hands as it builds Sports Direct stake

A US ACTIVIST investor that has amassed a stake in Sports Direct faces a battle to force change at the struggling retailer, according to City observers of its founder Mike Ashley.

Coltrane, a secretive US hedge fund with a track record of agitating against British boards, revealed this week that it has built a 3.3pc stake in Sports Direct, making it the fourth largest shareholder.

The revelation came hours after the high street giant admitted on Monday it had been forced to delay its annual results by as much as five weeks because of “complexities” in the integration of House of Fraser, which it bought from administration for £90m. Its auditor, Grant Thornton, needed more time and information to finish scrutinising the accounts, Sports Direct said.

The arrival of Coltrane, which pushed outsourcer Interserve into prepack administration in March by blocking a rescue plan, adds to pressure on Mr Ashley. The New York-based fund did not say how long it had been building its stake in Sports Direct or its reasons.

A City source, who used to work with Mr Ashley, said: “It’s hard to instigate change if he [Ashley] doesn’t want to do it. It’s not a normal company, it’s kind of pseudo-private company. Good luck to them [Coltrane] trying to make it change.”

The sportswear tycoon, who founded Sports Direct in Maidenhead in 1982, owns 61pc of the business, making it difficult for other investors to influence the board. A retail analyst added: “An activist investor doesn’t have a cat in hell’s chance of influencing Mike Ashley. How many times have people tried to influence him in the 12 years or so? It’s his way or the highway. If you don’t like it, don’t invest.”

Another analyst said Mr Ashley was likely to try to take Sports Direct private if trading deteriorates further, but it would have to make “a proper offer” to the remaining shareholders. Hopes of securing a take-private premium on the shares could be a reason behind Coltrane’s investment, he said.

Coltrane is run by Mandeep Manku, a former trader at Deutsche Bank. In 2007, he left to work for hedge fund manager Dan Loeb in New York, also known for its aggressive style of doing business. In 2012, Mr Manku set up Coltrane and it has been making demands from corporate boards since.

But Mr Manku will likely find a worthy opponent in Mr Ashley. He is also known for combative business ways.

After holding a boozy meeting in a pub, and challenging lower-ranking staff to a drinking competition, the billionaire vomited into a fireplace, it was claimed during a court hearing.

Coltrane and Sports Direct declined to comment.