Sports Direct boss Ashley embroiled in legal row over US deal

The retailer and its billionaire owner have been accused of short-changing one of the lenders to Eastern Outfitters – the business Sports Direct acquired in a $100m (£78m) deal back in 2017.

Eastern Outfitters was in Chapter 11 bankruptcy at the time of the purchase, but Sports Direct said the acquisition would “provide a footprint in US retail and a platform from which to grow US online sales” as Ashley looked to expand his empire overseas.

The deal to purchase Eastern Outfitters, which owns Bob’s Stores and Eastern Mountain Sports, was Sports Direct’s first major US retail acquisition.

It included the purchase of $17m of debt from the group’s former owner Versa Capital, which is claiming that Sports Direct owes it an extra $7.2m.

Sports Direct has dismissed the claim and resisted calls for Ashley to give evidence in court. The retailer insisted that Ashley is often not involved with deals until a late stage, leaving his management team and trusted advisors to take on the majority of negotiations.

In court documents seen by The Mail on Sunday, Ashley’s lawyer argued that the tycoon “did not exchange or generate any emails, text messages, or other documents electronic or otherwise regarding the transaction” and would therefore have no documents that would be relevant to the trial.

Sports Direct has argued that Justin Barnes, the man known as Ashley’s “fixer” when it comes to merger and acquisition activity, should give evidence in his place.

However, New York judge Andrew Borrok ruled that Ashley “has information that is material and necessary to its claims in this action” and ordered him to give evidence under oath.

Versa Capital subsidiary Vestis wants to question Ashley on “a specific conversation”, in which they say he agreed to pay “an additional consideration” on top of the $17m to buy the debt.

The next hearing in the case is scheduled for January.

It is the latest legal wrangle that Sports Direct has become entagled in. Earlier this year, it backed a legal challege by Combined Property Control Group (CPC) to Debenhams’ CVA. 

The department store chain won the High Court battle, with Mr Justice Norris claiming it was “entirely plausible” that CPC was “simply seeking to disrupt the CVA to their advantage of their paymaster, Sports Direct”.

Ashley has stepped up his campaign for MPs to look into Debenhams collapse, which left shareholders, including Sports Direct, penniless. 

In a two-page letter to the MP Rachel Reeves, seen by The Guardian, Ashley compared Debenhams administration to that of Thomas Cook, and wrote: “No one in parliament seems sufficiently interested about the Debenhams failure.”

He added: “It is very apparent that a head of steam is developing in the media and in the electorate that they will not tolerate these sorts of situations any longer, where businesses and advisers profit from playing the system at the expense of others.”

Ashley went on to claim that politicians and regulators were simply interested in their own PR. He said that the travails of businesses including Debenhams, House of Fraser and Goals Soccer Centres had been overlooked by ministers, but were “just as bad if not worse” than the collapses of Thomas Cook and Carillion, which MPs have looked into.