Mike Ashley’s machinations continue with the mogul’s attempt to oust Debenhams’ board and appoint himself as chief executive.
The Sports Direct boss called on the department store group to hold an extraordinary general meeting with the express purpose of ousting every single board director but chief financial officer Rachel Osborne, who joined the business in September, and vote him in as chief executive.
Having already seen off former chair Sir Ian Cheshire and removed chief executive Sergio Bucher from the board in his January coup, Ashley has moved to take full executive control of Debenhams – funded by his near 30% stake, which gives him the power to throw his weight around.
Mike on manoeuvres
The possibility of Ashley making a move like this has been on the cards for some time as Debenhams is working to refinance its debt. That refinancing is likely to involve a debt-for-equity swap that could dilute Ashley’s stake.
The cue for his intervention to seize control, insiders say, was a ‘thanks, but no thanks’ response from influential US bondholders – other shareholders and financiers, including those in the UK, are scratching their heads about how to respond – when he met with them earlier this week to propose that he should become chief executive.
Debenhams now has 21 days to set a date for the extraordinary general meeting, which then has to be held within 28 days, giving it until the middle of April to get its refinancing across the finish line – a nail-biting wait for Debenhams executives who will hope for an expedient solution.
It is tempting to think the 49-day period will also give Debenhams a chance to get its house in order with its shareholders but because of the make-up of its shareholder base, this is easier said than done: much of its voting base is managed by shareholder intermediaries who may not turn out to vote. That leaves Debenhams vulnerable to Ashley’s attack – he has an advantage when it comes to mustering the votes.
What about Sports Direct?
Ashley’s attempt to seize control should, one insider insisted today, raise the hackles of the Competition and Markets Authority (CMA). It would bring together control of two leading department store groups.
Others with specialist knowledge of competition rules thought otherwise. They said consumers are able to buy the products that department stores sell at multiple outlets, so there will not be a crisis of consumer choice. Whatever obstacles Ashley faces, the CMA is not likely to be one of them.
But if the authority does look into Ashley’s plot, it is likely to do so at a local rather national level because it does not define department stores as a market in its own right.
There is also the question of the future of Sports Direct – for shareholders, happy as Ashley might be to jump ship.
If his bid for Debenhams is successful, he will cede control of the business he founded to a relative unknown, deputy chief financial officer Chris Wootton.
It will take more than cage-rattling to make either retailer a share price hit in the City
You might have thought Sports Direct’s share price would be affected by that but its share price has not radically changed: it is currently at the same price as it was in 2016 despite multiple acquisitions, a court case and what seems like countless appearances in front of MPs. This is a sign of resilience in the eyes of some, while others might question why there has been no advance and ask whether the Debenhams furore is simply a distraction that will bring no value.
“The share price is unchanged on the latest Debenhams news so there’s clearly a degree of understanding from shareholders of what an investment in Sports Direct may bring,” says one analyst.
If only it were possible to say the same for Debenhams’ shareholders. The share price rose 15% on Friday morning, implying an Ashley premium.
But the share still languishes at just 3p at the time of writing, and Sports Direct is flat. It will take more than cage-rattling to make either retailer a share price hit in the City.