It is beyond belief that Debenhams has constantly slammed the door shut on Sports Direct tycoon Mike Ashley’s attempts to help it through its difficulties.
Good neighbour Mike, as Debs’ biggest shareholder, has offered countless cups of sugar to tide over the hard-up department store group until the cheque it’s waiting for drops through the letterbox.
He’s always been on hand to offer helpful advice over the garden fence. He’s offered loans -– £40m at the end of last year and £150m just this month. But Debs, all fur coat and no knickers, ungratefully claimed that the terms might not be in the interests of other stakeholders.
“It’s not surprising that many investors might like to take Ashley’s money and run”
Conscious that some of Debenhams’ problems are down to the bad company it keeps, Ashley helpfully had the chair and chief executive chucked off the group board.
He further advised that it would be a good idea if the entire board, other than the finance director, were also bid a brisk goodbye. Selflessly, he has offered time and again to move in himself and put Debs’ house in order as chief executive.
All his kindhearted suggestions have come to nought so far. It’s amazing he hasn’t called the social services. But ever unwilling to turn his back on a friend in need, Mike has now offered to bear Debenhams’ troubles entirely on his own shoulders with a possible cash offer.
And Debenhams response? Once again to throw Ashley’s altruism back in his face. Thanks for the offer, Debs has said, we’ll certainly think about it but can you answer a few questions first?
Would you mind awfully giving us a bit of an idea of an offer price and what the terms might be? Do you have a plan for how to repay Debenhams’ existing debt – sorry to ask, but it will fall due if there is a change of control. Oh, and what were you thinking about doing to sort out Debenhams’ immediate funding requirements?
Talk about ungrateful. You try and do someone a good turn and just see where it gets you. No wonder Ashley is getting a bit worked up.
“At the time of writing, Debenhams’ share price is up almost 40% – although that only takes it to just over tuppence”
Debenhams’ apparent reluctance to accept Ashley’s assistance is all the more perplexing when you look at what a difference Ashley has made at House of Fraser.
Getting on for a year after its administration, its remarkable makeover is testament to Ashley’s ambition to create a ‘Harrods of the high street’. Just imagine if Debenhams could flourish in the same way, if only it would only take on board Ashley’s recommendations.
At the time of writing, Debenhams’ share price is up almost 40% – although that only takes it to just over tuppence.
Given Debenhams’ difficulties, and the fact that the retailer has said restructuring options that may be followed “would result in no equity value for the company’s current shareholders”, it’s not surprising that many investors might like to take Ashley’s money and run.
However, their investment has already been all but wiped out. The shares were worth nearly 95p three years ago and have been on a downhill slide ever since.
There may be plenty to criticise about how Debenhams has performed in recent years. And even Ashley has some fair points.
His solutions to putting the business back on track would no doubt serve his own interests; he is one of the most astute operators in the business.
But whether they will really serve the interests of anyone else – shoppers, staff, suppliers or loss-making shareholders – must be questionable. The fear is that he is a wolf in sheep’s clothing.
That said, Debenhams’ leadership needs to set a clear, convincing direction itself. That’s what it’s trying to do as it seeks to refinance and then restructure. A solvent restructuring cannot be entirely ruled out, though hurdles remain and a CVA must still be on the cards.
But Ashley, if he wanted to, could be part of the bigger discussions to keep Debenhams afloat rather than pursuing his own agenda. Self-interest might be best served by common interest.