Shares in Debenhams remained up by more than 54% this afternoon (27 March) after Mike Ashley-owned Sports Direct International Plc said it is considering a “possible” offer of GBP61.4m (US$81.1m) to take full control of the struggling British department store chain.
Sports Direct is already Debenhams’ largest shareholder with a near 30% stake in the company – and now wants to add the stake it doesn’t already own.
The terms of the potential deal are that Sports Direct would offer 5p in cash per ordinary share, which would value the total currently issued share capital of Debenhams at about GBP61.4m. If made, the offer would represent a premium of approximately 127% to the closing price of Debenhams shares on 26 March, Sports Direct said.
The retailer would also assist Debenhams in addressing its immediate funding requirements, subject to pre-conditions including immediately appointing Ashley as its CEO and agreeing not to enter into any third party funding arrangements, granting any new security over any of its assets or entering into any administration, CVA or other insolvency process.
“Sports Direct believes that the possible offer would offer fair and full value for Debenhams,” the retailer said. “It does not believe that Debenhams has the same value if it is (in effect) handed over to Debenhams’ existing lender group. As such, Sports Direct would expect the possible offer to be attractive to Debenhams shareholders and other stakeholders as an alternative to Debenhams’ current restructuring and refinancing process.”
The move comes just days after Debenhams revealed it was seeking a cash injection of up to GBP200m (US$263m) from existing lenders to “pursue restructuring options to secure the future of the business.” This was immediately followed by an offer from Sports Direct International to buy its Danish business Magazin du Nord for GBP100m.
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By GlobalData“Possible” offer for Debenhams looks anything but
Patrick O’Brien, UK research director at GlobalData, notes that while Ashley’s desire to buy Debenhams and merge it with House of Fraser is clear, his talk of a GBP61m offer, without actually making one, is “hard to take too seriously.” Especially as it would “also involve the taking on of over GBP500m of debt and over GBP4bn in lease liabilities.”
Instead, O’Brien believes Ashley is “hellbent on derailing the debt-for-equity swap which would destroy his chance to create a ‘House of Debenhams’, and further moves are to be expected.”
Debenhams’ public relations adviser Brunswick Group told just-style there is no futher comment at this stage.
Separately, online value retail and education business Findel has rebuffed a takeover bid from Sports Direct that it says is “highly opportunistic and significantly undervalues” the company.
