Sports Direct (LON:SPD) announced on Wednesday that it was considering taking full control of Debenhams (LON:DEB) in a £61.4 million bid for the struggling department store.
Shares in Debenhams plc surged over 50% following the announcement.
The announcement comes after weeks of back and forth moves between the two businesses.
Currently, Mike Ashley’s Sports Direct owns almost 30% of Debenhams. However, last week Debenhams revealed potential restructuring plans that could wipe out its existing shareholders, threatening Sports Direct’s stake in the business.
Brandes Investment Partners, Odey Asset Management and Landmark Group also hold significant stakes in the business.
Last week the department store chain saw its fifth-largest investor call it quits after Invesco Asset Management confirmed it had sold its almost 5% stake in the business.
Sports Direct said on Wednesday that it was now considering making an offer of 5p per share for the department store. This is more than double its closing share price on Tuesday of 2.2p.
“The terms of the possible firm offer are that Sports Direct would offer 5p in cash per ordinary share for the entire issued and to be issued share capital of Debenhams which would value the total currently issued share capital of Debenhams (excluding treasury shares) at approximately £61.4 million,” the company said in a statement.
The potential offer, however, is condition upon the immediate appointment of Sports Direct boss Mike Ashley as CEO of Debenhams. Debenhams said only yesterday that Mike Ashley’s takeover plans will not provide immediate relief to its funding problems.
The department store chain has previously questioned whether a conflict of interest would occur if Mike Ashley was appointed CEO. This is because Sports Direct also owns Debenhams’ largest rival – House of Fraser. Sports Direct has reaffirmed, however, that Mike Ashley is prepared to leave his current Sports Direct role if he were to gain control of Debenhams.
“In addition, the Possible Offer is pre-conditional upon the Debenhams group agreeing not to enter into any third party funding arrangements (including those outlined in Debenhams statement of 22 March 2019), granting any new security over any of its assets or entering into any administration, CVA or other insolvency process,” Sports Direct continued.
At 09:55 GMT Wednesday, shares in Debenhams plc (LON:DEB) were trading at +50.32%.
Shares in Sports Direct International plc (LON:SPD) were trading at +0.07% as of 09:44 GMT.
