Sports Direct (SPD) Launched Aggressive Attack At Debenhams (DEB) Board Members

The Sports Direct International PLC (SPD) retail chain was formed in the year 1982; headquartered in London, the United Kingdom, is a well-known supplier of retails sports, footwear, leisure clothing, apparel and equipment products through a network of retail stores and online channels. Sports Direct in the last couple of months is trying hard to install its Chief Executive Mike Ashley into Debenhams as Chief Executive. Debenhams was offered £150 million interest-free loan by Sports Direct and in return Sports direct will get 5 per cent additional equity. But after all the efforts went into the vein, they offered Debenhams a £61 million to purchase remaining 70 per cent equity. Sports Direct already owns 29 per cent of Debenhams and if Debenhams decided to go with rival refinancing plans that would make the shares worthless.

Sports Direct - Share Price Performance

Daily Chart as at April-08-19, before the market close (Source: Thomson Reuters)

On 8th April 2019, at the time of writing (before the market close, GMT 1:52 PM), Sports Direct Plc shares were trading at GBX 282.00, up by 0.07 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 436.10/GBX 221.10. The outstanding market capitalisation was around £1.52 billion.

As a result, Sports Direct’s Chief Mike Ashley have accused Debenhams top executives of control of the Debenhams with a sustained programme of falsehoods. Sports Direct had issued a public statement in which they have questioned the working of the company and asked the industry regulators to do an investigation and its shares must be suspended from trading. On 7^th April the Debenhams called an urgent board meeting to discuss the options available to them. Whether to accept Sports Direct offer and cede controls in hand of Mr Ashley or to go for other refinancing options.[optin-monster-shortcode id="wxhmli4jjedneglg1trq"]

The meeting between both the companies resulted in a dispute between both. Sports Direct Top management attended a meeting with Debenhams management, and they accused Debenhams of presenting fake facts and persuaded them to sign an agreement which will restrict not to trade in shares and bonds of Debenhams for a certain time period.

As proof to their statement, Mr Ashley and other management members who attended the meeting with Debenhams undergo a lie detector test. They also invited Debenhams Mr Duddy and Mr Adams for the similar tests whereas Debenhams declined to comment as they intended to maintain silence to the allegations.

Debenhams – Share Price Performance

Daily Chart as at April-08-19, before the market close (Source: Thomson Reuters)

On 8th April 2019, at the time of writing (before the market close, GMT 1:52 PM), Debenhams Plc shares were trading at GBX 1.9576, down by 4.04 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 25.42/GBX 1.10. The outstanding market capitalisation was around £25.05 million.

Debenhams is expected to announce its response to a Sports Direct offer to underwrite a £150 million rights issue on Monday 8^th April that would significantly reduce the debt of struggling retailer. The offer made by Sports direct was conditional and Mr Ashley should be offered the position of chief executive of Debenhams.

Both companies have wide trust issues. Debenhams is afraid that once Mr Ashley gets the full control of the company, he would default on the promised £150 million.

The Debenhams have already agreed with the creditors another refinancing plan which will enable creditors to control the assets of the company. It will also raise spare funds of £100 million. In order to accept the offer of Sports Direct, Debenhams need the approval of its creditors.

Mr Ashley had got a deadline of Monday, April 8 by creditors to come up with different refinancing plan or to go for a takeover. Whereas, Mr Ashley is avoiding launching a takeover bid as it will enable switching of control for Debenham’s debt. As a result, Mr Ashley will be required to refinance over £500 million of borrowings which is equal to twice of Sports Direct’s current net debt.