Debenhams set for administration after rejecting Sports Direct offer
Retailer’s biggest shareholder, Mike Ashley, embroiled in bitter battle for control with its board
Debenhams could be heading for administration after lenders rejected a last-minute offer from Sports Direct to plough £150m into the struggling department store chain.
Sports Direct, which owns 30% of the chain, wants to install owner Mike Ashley as chief executive as it seeks either to refinance the business or take it over entirely.
It comes after Debenhams, which has 165 stores and employs about 25,000 people, reported a record pre-tax loss of £491.5m last year.
The BBC says the retail tycoon, who is Debenhams’ biggest shareholder, “has been embroiled in a battle for control with its board and has already made clear his disdain for its current management”.
He has accused its executives of “a sustained programme of falsehoods and denials” and urged them to take a lie detector test while calling for an investigation and the firm’s shares to be suspended.
“The meetings in question were pivotal” says the Financial Times. “In February Sports Direct signed a non-disclosure agreement with Debenhams, making it an 'insider' in legal terms and precluding it from acquiring more of the company’s shares or bonds in the market. That left the company increasingly unable to influence events, as creditors controlled the agenda”.
The Guardian reports that “in a highly unusual statement, Ashley said he and his colleagues took a lie detector test to 'prove they were telling the truth' and suggested Debenhams’ interim chair, Terry Duddy, and the non-executive director, David Adams, should also take such tests 'to clarify their recollection' of a meeting about the NDA.”
With relations rapidly deteriorating, on Friday night Sports Direct sent a letter to the board of Debenhams offering to underwrite £150m of new equity funding on the condition that its billionaire owner was made chief executive.
Lenders had been set a 5pm deadline on Monday to accept the offer but “without a deal between the two sides by the end of Monday, the 340-year-old chain faces being placed into a pre-pack administration with lenders taking control - wiping out the holdings of shareholders including Sports Direct”, says Sky News.
Sports Direct said it was still giving “active consideration” to a 5p-a-share takeover bid for the 70.1% of Debenhams it does not already own, but shares in the chain closed down 10%, “reflecting increasing scepticism that such an offer will materialise or be approved by creditors, who are expected to push the company into administration before Ashley can table such an offer”, says the FT.
If Debenhams opts for a pre-pack, it could be announced as soon as this morning “and would only affect Debenhams’ holding company, meaning the stores would continue to trade”, says The Guardian.
However, the lenders want Debenhams to close about 50 stores via an insolvency process, known as a company voluntary arrangement, which is likely to follow within weeks.