Sports Direct, the retailer run by its mecurial founder Mike Ashley, bought a 4.6% stake in Debenhams on Thursday night, in the company’s latest multimillion pound punt on a rival retailers’ shares.
The sports chain said it had spent around £33m buying the shares – adding to a derivative trade it made on the department store’s stock in January and effectively taking its current interest in Debenhams shares to 11.2%.
The move also follows Sports Direct’s £43m bet last week that shares in troubled supermarket Tesco will recover after their recent slump.
In the wake of the derivatives trade earlier this year Sports Direct has begun to trial concessions within Debenhams, where it rents space in the department stores. So far four of these have been opened and one retail watcher speculated on Thursday night: “Maybe Sports Direct is eventually after a seat on the board, so that it can drive the commercial relationship with Debenhams faster.”
In a statement, Sports Direct said: “As previously announced, Sports Direct is already working together with Debenhams and looks forward to building this relationship”.
However, the share trade is bound to confuse the City. In January Sports Direct bought a 4.6% stake in Debenhams, which it then sold at a profit days later and instead made the derivative trade, which gives it an interest in 6.6% of Debenhams’ shares. Sports Direct has explained the switch from shares to a derivative as a “more efficient use of the company’s funds” - but the company did not comment on Thursday night on why it had again bought shares in the retailer rather than use derivatives.
The deal struck over Tesco was also a derivative trade – a so-called put option, to buy 23m of the grocer’s shares from Goldman Sachs at a set price in the future. Tesco shares have lost a further 7% since news of Sports Direct’s bet.
Debenhams shares began the year trading at around 75p - and were 110p a year ago - but now cost 60p each. Company insiders said that it is merely a coincidence that the January share purchase - and the one in October - were both for a 4.6% block of shares.
Apart from the Debenhams and Tesco trades, Mike Ashley, who also owns Newcastle United football club, reportedly tried to undermine the Chinese takeover of House of Fraser in April by buying an 11% stake in the department store. He bought the shares from the entrepreneur Sir Tom Hunter and still holds to stake.
Simon Goodley Photograph: Scott Heppell/AP