Tycoons ready to do battle over Debenhams
RETAIL billionaires Mike Ashley and Philip Day are set to battle for control of Debenhams as the race to become the next king of the high street intensifies.
Just days after Mr Ashley’s Sports Direct pipped the owner of Edinburgh Woollen Mill to the takeover of House of Fraser, retail sources say both entrepreneurs have trained their sights on its closest rival.
Mr Ashley is said to be weighing a bold plan that would result in the two department store chains ultimately being merged.
He is expected to oversee a dramatic overhaul of House of Fraser before pushing for an equally radical restructuring of Debenhams, that would pave the way for a combination of the pair.
Sports Direct swooped on House of Fraser on Friday, after weeks of negotiations, seeing off a rival bid from Mr Day. Mr Ashley paid £90m to get his hands on a name he has been stalking for years, buying it just hours after the administrators had been called in. It became the biggest retail casualty since Woolworths collapsed a decade ago.
Mr Day had put together a counterbid with a consortium of major suppliers led by Calvelex, one of Portugal’s top textile manufacturers. The Portuguese make a million garments a year and supply many of the UK’S high street retailers. It is thought that Mr Day and his backers could now turn their attention to Debenhams. Like Mr Ashley, the Dubai-based businessman is understood to be keen to take his retail empire more upmarket.
He has rescued a string of high street names over the past decade, including Peacocks, Jane Norman and Austin Reed. César Araújo, the CEO of Calvelex, tried to buy fashion chain Jaeger last year. However, Mr Ashley is in pole position to influence the future of Debenhams. He has amassed a near30pc stake in the company through a series of share purchases.
The tycoon deployed a similar strategy when his pursuit of House of Fraser first began in 2014, snapping up 11pc of the retailer.
The holding was meant to be a springboard to full ownership but he was comprehensively outbid by China’s Sanpower, a little-known mini-conglomerate run by former government official Yuan Yafei.
City sources say a bid battle for Debenhams could be the catalyst for a much-needed overhaul. Like House of Fraser, its fortunes have seriously deteriorated in recent months, raising concerns about whether it too could be forced under.
Debenhams’ share price has collapsed this year, sinking two thirds to less than 12p following a series of profit warnings. A renegotiation of its banking covenants has bought some breathing room from an unsustainable debt pile and it is hoping that a planned sale of its Scandinavian department store Magasins du Nord will raise as much as £100m.
However, the retailer needs to dramatically scale back its high street presence if it is to have a long-term future. Analysts believe that more than half of its 170-strong estate may have to be offloaded, though that will only be possible with the blessing of landlords and they may be reluctant to approve such a move, given that only a small number of Debenhams stores are lossmaking.
Boss Sergio Bucher also needs to persuade lenders to agree to a comprehensive balance sheet restructuring. It is forecast to end the year with about £320m of debt, more than double its stock market value, which has shrunk to just £138m. Mr Ashley has pledged to transform House of Fraser into “the Harrods of the high street”. He also said Sports Direct will “do its best to keep as many” of its 59 stores open as possible.
Chancellor Philip Hammond has suggested the Government is planning a special tax on online retailers in a bid to help save the high street.
A spokesman for Mr Day said: “Mr Day has absolutely no interest in Debenhams.”
Models wear clothes made by Kangol, a brand owned by Mike Ashley’s Sports Direct since 2006. His most recent acquisition is House of Fraser, the struggling retailer he bought for £90m last week and which he wants to turn into ‘the Harrods of the high street’
Mike Ashley: the retail billionaire is said to be hoping to merge House of Fraser and Debenhams