Sarah Butler 

Mike Ashley launches coup attempt to seize control of Debenhams

Sports Direct boss announces plan to oust all but one director at ailing department store
  
  

Mike Ashley
Mike Ashley is attempting to appoint himself to the Debenhams board in an executive role. Photograph: Eddie Keogh/Reuters

The Sports Direct boss, Mike Ashley, is attempting a coup at Debenhams to appoint himself to the board in an executive role and oust nearly all the other directors.

In a dramatic stock market announcement filed late on Thursday, Ashley pledged that, if appointed to the board of the ailing department store, he would step down from his role as chief executive of Sports Direct, in which he holds a majority stake. Sports Direct owns nearly 30% of Debenhams.

The retail boss said he was calling a general shareholder meeting as he wanted to seize control of Debenhams “during this business critical period” and all directors would be ousted except for the department store’s finance director, Rachel Osborne.

The stockmarket statement said if successful in his bid to get on the Debenhams board, he would be succeeded at Sports Direct by Chris Wootton, currently its deputy chief financial officer.

It said a fuller statement on Sports Direct’s reasons for calling a Debenhams shareholder meeting in order to instal Ashley as boss would follow “in due course”.

Debenhams said: “The board has been engaging with Sports Direct and our other stakeholders and is disappointed that Sports Direct has taken this action. In the meantime, we remain focused on delivering the restructuring of our balance sheet, and our discussions are well advanced.”

Gaining control of Debenhams would be the latest addition to Ashley’s empire, which already includes the House of Fraser department store chain, Flannels designer retailer, Evans Cycles and the recently acquired Sofa.com.

This week the company filed a bid for online shopping specialist Findel, after missing out on attempts to buy cafe group Patisserie Valerie and entertainment retailer HMV.

The attempted boardroom coup comes just weeks after Ashley ousted Debenhams’ chairman, Sir Ian Cheshire, and demoted the group’s chief executive, Sergio Bucher, from the board by teaming up with fellow shareholder Milestone Resources, controlled by the Dubai-based retail billionaire Micky Jagtiani, who owns a 7% stake.

Cheshire was replaced by former Argos boss Terry Duddy, who has met with Ashley and also lined up a £40m lifeline from lenders, as he tries to negotiate longer term refinancing for the struggling department store group.

That deal was seen as a snub to Ashley, who had offered Debenhams a £40m loan before Christmas, which the company rejected because it was offered on terms that would give Sports Direct a preferential position over other shareholders.

In recent weeks, Debenhams’ board has attempted to get Ashley on side by giving him access to limited financial information about the store chain after he signed a non-disclosure agreement.

Ashley’s latest shock intervention comes as Debenhams desperately tries to refinance £520m in debt facilities, including £320m of loans and £200m of bonds, which are due to be repaid next year.

A deal is expected to include a debt for equity swap and 50 store closures.

Earlier this week, the company issued a profit warning as UK sales continued to fall and it faced increased financial costs.

The retailer said its previous profit forecasts for the current financial year – made just two months ago – were no longer valid after a 6% slide in UK sales in the 26 weeks to 2 March and an increase in finance costs.

On Thursday, credit ratings agency S&P downgraded its assessment of Debenhams’ debt and said it was preparing for further downgrades because it feared a “liquidity crisis” or an insolvency.

“In light of its current performance, we still consider Debenhams’ financial flexibility to be very limited,” S&P said in a note.

Ashley’s bid to call a shareholder meeting is likely to be an attempt to disrupt Debenhams’ refinancing attempts.

The Sports Direct boss has made it clear that he wants a merger between Debenhams and House of Fraser, which he bought out of administration for £90m last year.

Shares in Debenhams have slumped nearly 90% in the past year to just 3p each after the company issued three profits warnings in 2018.

The group is hamstrung by its debts and hefty leases on its large stores as it struggles to adapt as shoppers buy more online.

The collapse of House of Fraser, in which some customers lost money after buying expensive items such as furniture online, has also made shoppers cautious about spending large sums online with Debenhams.

 

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