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Debenhams chairman issues bid ultimatum to raging Sports Direct owner – as high street battles to survive its worst Christmas ever
THE chairman of Debenhams has delivered an ultimatum to Mike Ashley inviting him to make an offer for the entire chain of department stores – if he is serious about wanting to take control.
In an interview that will send shockwaves across the High Street, which is facing its toughest ever Christmas period, Sir Ian Cheshire challenged the Sports Direct owner to stump up the cash for a formal takeover bid.
Billionaire retail tycoon Ashley was infuriated last week when the Debenhams board rejected his unsolicited offer of a £40million loan, which was widely interpreted as a backdoor attempt to position himself to take control of a business in which he already owns 29.7 per cent of the shares.
Like dozens of its competitors, Debenhams has faced unrelenting pressure from online rivals and a decline in footfall. It has announced plans to close 50 stores and is renegotiating leases with landlords.
Ashley, who is said to view himself as the ‘saviour’ of the high street after rescuing House of Fraser from collapse, launched a tirade against the Debenhams board for its rebuttal, referring to speculation the chain ‘has zero chance of survival’ and publicly releasing details of his loan proposal.
Speaking exclusively to The Mail on Sunday, Cheshire said: ‘If he comes through the front door with an offer that we can recommend, we are not ignoring him. We are not Little Englanders that have to defend our borders. This is a grown up bunch of people doing the right thing for the broader shareholders and stakeholders, including our 25,000 staff.
‘We’re a public company. If you want to make an offer for the other 70 per cent you don’t own, then you’re free at any time.’
The chain made £33million in the year to August. It plans to close 50 stores and sell its Danish business to raise funds for the overhaul. In response to the loan rejection, Ashley said November trading was ‘unbelievably bad’ and that Debenhams and other retailers risked being ‘smashed to pieces’.
One rival industry chief said: ‘Someone said last week he’s 20 per cent genius, 60 per cent common sense and 20 per cent bonkers, but I don’t think he realises what all this looks like. There don’t seem to be any boundaries. He’s unpredictable and, in this case, a bit dangerous.’
Cheshire said he had had ‘nearly two years of listening to his views’ on the chain. But he said: ‘Things got complicated when our major shareholder became the owner of our biggest direct competitor [House of Fraser]. Then it got really disappointing when he leaked a private conversation because the irony is that we actually remain very open to working with him.
‘He has obviously got frustrated – mostly because we wouldn’t do exactly what he wanted. But we genuinely couldn’t, mainly because the board couldn’t hand him a deal where he had effective voting control and secured debtor position which would put him ahead of the pension fund and ahead of our banks.
‘I’m sure – at least I hope – that Mike didn’t intend to create this but it destabilises our suppliers.’
Buying the firm would cost Ashley as much as £500million, analysts said. That would include more than £300million debt and offering a ‘multiple’ of the current 5 pence share value. Cheshire added that the board, which includes chief executive Sergio Bucher, has since had feedback from lenders endorsing its decision. Other shareholders said Sports Direct had not contacted them to discuss Ashley’s strategy.
Invesco Perpetual UK fund manager Martin Walker, who oversees about 4 per cent of Debenhams shares, said: ‘It’s unusual for a shareholder to be so actively talking down the value of his investment. He may well have an agenda behind doing that but that is not helpful for a business.
‘If Mike Ashley wants to control Debenhams, he’s very welcome to make me an offer for my shares and I will consider that offer based on the information I have at the time. What I’m unlikely to vote for is Sports Direct taking control of Debenhams by stealth.’
‘I’m absolutely sure that both Sergio and Ian are both totally engaged in this business. That sleeves are being rolled up. That they are actively managing this business with a professional plan.’
Figures prepared for The Mail on Sunday by Springboard, which tracks the number of visitors to stores, showed that shopper traffic has fallen 3.5 per cent in the past three weeks.
The numbers include a comparative boost early last week for a few days because of a slump last year during heavy snowfall. But, despite that, last week overall is expected to be down on last year.
Troubling statements from retailers have hit share prices. Marks & Spencer’s dropped 18 pence last week to £2.63 – the lowest since the financial crisis in 2008. If the slump continues, M&S could face a battle to avoid relegation from the blue chip FTSE 100.