Billionaire Mike Ashley, vying with creditors for control of Debenhams Plc, is considering an offer that would value the troubled UK department-store chain’s equity at £61.4 million pounds (RM330 million).
Ashley’s Sports Direct International Plc, which already owns about 30% of Debenhams, said it’s weighing a bid worth 5 pence a share in cash. Before going firm on his offer, Ashley is demanding that Debenhams name him chief executive officer and halt a consent process to access £200 million (RM1 billion) from its lenders that’s due to finish tomorrow at 5pm.
The move ratchets up the struggle for Debenhams, a fixture of the UK’s shopping streets that’s fallen on hard times as consumers buy more online and confront the economic vagaries of Brexit. It’s the latest of Ashley’s attempts to wrest control of the retailer and save his stake after offering two spurned loans and proposing last week to buy Debenhams’ Danish stores for £100 million (RM538 million).
“Ashley’s scattergun approach shows how desperate he is to protect his stake,” Neill Keaney, an analyst at CreditSights in London, said in a telephone interview. “This potential offer for the equity is now a final throw of the dice, but it doesn’t do anything to tackle Debenhams’s debt issues.”
Funding Requirements
Sports Direct’s offer is more than double Tuesday’s closing share price, but the stock has fallen about 90% over the past 12 months as the company seeks a rescue. The shares almost doubled early Wednesday in London before paring gains to 50% at 10:30 am.
A Debenhams representative declined to comment. The retailer said Tuesday it would consider any offer from Ashley, but that he’d have to address its immediate funding requirements and repay up to £560 million (RM3 billion) of debt.
Sports Direct said Wednesday it would work with Debenhams on its financing needs, without providing details or mentioning the debt pile.
Ashley has stepped up his pursuit of the chain as he stands to lose most of his investment. Following the plunge in the share price, the refinancing plans being discussed with creditors may wipe out all equity value for shareholders, Debenhams said last week.
A cash offer would be a change of direction from Sports Direct, which has previously said it would be interested in rescuing Debenhams out of insolvency, as it did with rival department-store chain House of Fraser last year. If Sports Direct were to take on Debenhams debt in an acquisition, the company would likely breach its leverage threshold on its own debt obligations, Berenberg analysts wrote in a note to clients.
“It is becoming increasingly more likely that Sports Direct will look to acquire Debenhams outright rather than see it collapse into administration or embark on a restructuring process,” the analysts wrote.