The UK based departmental store, Debenhams Plc is at the verge of administration after it decided to discard the offer from Sports Direct’s chief Mike Ashley, made in the early hours of Tuesday to infuse £200 mn into the departmental store.
The billionaire founder of Sports Direct, Mike Ashley called this move as a “national tragedy”.
Debenhams Plc – Early Days
In 1778, William Clark started a retail store on Wigmore Street and vending costly fabrics and gloves.
In the year 1813, William Debenhams invested in William Clark retail, which then becomes Clark & Debenhams.
In the year 1905, Debenhams got incorporated post series of retail, wholesale and manufacturing takeovers and ultimately became one of the biggest retailers in the UK.
In 1919, Debenhams and its rival Marshall & Snellgrove merged, and a year later they acquired Knightsbridge retailer Harvey Nichols.
In the year 1928, Debenhams got listed as a public company on the London Stock Exchange.
In 1985, Burton Group acquired Debenhams, and in the year 1998, the company got spun-off out of the Burton Group and became Arcadia with a total value of £1.4 billion.
In the year 2003, the group got acquired by CVC, Merrill Lynch and TPG for a total consideration of £1.7 billion.
In the year 2006, the private equity investors refloated its shares on the London Stock Exchange with the same equity value, but its debt surged to 10 times of the debt it had in 2003.
Sports Direct’s Mike Ashley's Entry into Debenhams
In October 2018, Debenhams reported a full-year loss on account of heavy impairment charges and scrapped dividend pay-out to shareholders.
In December 2018, Sports Direct's Mike Ashley shown his intention to lend the debt-ridden Debenhams £40 million.
In February 2019, Debenhams agreed for an additional credit line of £40 million, and on March 13, 2019, Sports Direct's Ashley offered another debt of £150 mn to the Debenhams Plc.
On March 27, 2019, Mike Ashley’s said he was considering 5-paise per share bid for Debenhams Plc.
On March 29, 2019, the debt-ridden departmental store business agreed for refinancing of £200 mn and asked Sports Direct to respond by April 08, 2019.
On April 05, 2019, Mike Asley’s offered to underwrite £150 million rights issue and on April 08, 2019, the Sports Direct offered an improved deal to underwrite right issues.
And, on April 09, 2019, Debenhams control went to lenders in “pre-pack” administration.
Sports Direct has the most substantial stake in the Debenhams Plc to the tune of 29.9 per cent. But according to some restructuring experts, the strategic missteps taken by Debenhams left Sports Direct in the cold and occurring a £150 mn loss on their stake in the Debenhams.
Mike Asley, called this step as a "national scandal" and could lead to thousands of job cuts. The UK based department-store business has around 165 stores and has employed approximately 25,000 employees.
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