Deben­hams is in trou­ble. But the board could yet fend off Ash­ley’s ad­vances

The Observer - - Analysis -

Last week, con­tro­ver­sial sports­wear ty­coon Mike Ash­ley rolled an­other gre­nade into the Deben­hams board­room, deftly us­ing his near-30% share­hold­ing in the com­pany to oust the chair­man and chief ex­ec­u­tive at its an­nual meet­ing. So what now for the strug­gling de­part­ment store, which has seen its share price drop 86% in the last year?

Erst­while chair­man Sir Ian Cheshire has quit but chief ex­ec­u­tive Ser­gio Bucher, a for­mer Ama­zon ex­ec­u­tive, is ap­par­ently hang­ing on de­spite los­ing his seat on the board.

Ash­ley in­sists it is not in his in­ter­ests for Deben­hams to fail – his Sports Di­rect has al­ready lost more than £100m on its in­vest­ment in the com­pany’s shares. But then why pull the rug out from un­der the man­age­ment team? It looks like Ash­ley is try­ing to win con­trol of the busi­ness on the cheap.

Given that there was such a threat at their door, in­vestors and the board were caught nap­ping. Less than 70% of share­hold­ers both­ered to cast the votes that could have saved Cheshire and Bucher from hu­mil­i­a­tion.

In­terim chair­man Terry Duddy, a re­tail vet­eran whose last job was run­ning the now-de­funct Home Re­tail Group, which owned Ar­gos and Homebase, now takes on the Her­culean task of sta­bil­is­ing Deben­hams’ fi­nances. It’s a big job, with debts of nearly £300m to be re­fi­nanced and a need for a fresh in­jec­tion of funds to com­plete its turn­around plans.

Some ar­gue shut­ting a num­ber of its 165 de­part­ment stores is the an­swer, via an in­sol­vency process known as a com­pany vol­un­tary ar­range­ment, but that is a hard trick for a quoted com­pany that is not at death’s door to pull off. Deben­hams is still prof­itable, for the time be­ing any­way.

No one wants Deben­hams – which em­ploys 20,000 staff across the coun­try – to be­come an­other high street statis­tic, but Duddy and co need to con­vince its lenders, sup­pli­ers and shop­pers that it has a rai­son d’etre – and out­smart Ash­ley.

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