Debenhams today said it would give a takeover offer from Sports Direct “due consideration by the board” if it comes – but says that it intends to press on with its proposed refinancing nonetheless. Any offer from Sports Direct, it said, should cover not only how much it planned to bid, but how it intended to repay Debenhams’ outstanding debts that come to at least £200m.
The update comes hours after Sports Direct said last night that it may make a cash bid for Debenhams – thereby setting itself a 28-day deadline, under takeover regulations, to put up or shut up.
The move represents a stepping up of Sports Direct’s campaign to take control of Debenhams, in which it has a 29.7% stake – just short of the 30% at which it would have to table an offer for the department store.
Previously Sports Direct, led by Mike Ashley, suggested that it could buy Debenhams’ Danish business, Magasin du Nord for £100m and that Ashley could quit Sports Direct to become chief executive of Debenhams following the move.
The new suggestion of a takeover bid starts to put the process on a more formal footing, since as a result Sports Direct now has a deadline of 5pm on April 22 to either put in a firm offer or to state that it does not intend to make an offer.
Meanwhile, Debenhams is looking for the backing of its debt holders for a £200m rescue deal, that would put the business in the hands of its lenders rather than shareholders including Sports Direct.
This week Sports Direct said that any offer it made for Debenhams would be compelling, since those who wanted to cash in their stake holdings could do so – although how much they would get would depend on how Sports Direct is prepared to pay. Sports Direct also said that it “would seek to run the Debenhams business for the benefit of all of Debenhams’ stakeholders rather than for the benefit of Debenhams existing lenders,” whereas the current refinancing plans would see shareholders lose out.
However, Debenhams said today that it noted Sports Direct International’s announcement that it is considering a possible offer but notes that “there is no certainty that any offer will ultimately be forthcoming.” It added: “Given the timetable associated with any public offer, an offer for the company would not, in itself, address Debenhams’ immediate funding requirement. Therefore, the company will continue with its plan to obtain the funding required, as outlined in Debenhams’ statement of 22 March 2019.”
It said that any offer from Sports Direct must not only state the offer price and any terms of the offer, but must include “ii) a clear plan of how Debenhams’ existing debt - which will fall due on any change of control - will be repaid; and iii) a proposal that addresses the immediate funding requirements of the business.
If Sports Direct and Ashley did go ahead with the acquisition – and if it won clearance from competition authorities, given its existing ownership of the House of Fraser department store chain – Debenhams would be latest in a string of acquisitions over the last year.
Sports Direct has already bought House of Fraser and the Evans cycle shop chain from administration this year. To that it has added sofa.com, and has an ongoing mandatory bid to buy Findel, owner of the Studio and Ace value websites – which Findel has said undervalues it.
Debenhams is a Leading retailer in IRUK Top500 research, while Sports Direct is Top150. Sports Direct’s interest in Debenhams comes at a time when the department store is struggling to discover how it can remain relevant for shoppers in an age of online retailing. Department store customers are leading the move from in-store to online shopping, leaving them faced with the question of how to attract shoppers back to their stores.
Image courtesy of Debenhams