Ty­coons ready to do bat­tle over Deben­hams

The Sunday Telegraph - Money & Business - - Front page - By Ben Mar­low

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

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