Mike Ashley’s Sports Direct group has increased its interest in Debenhams, taking control of thousands more shares via a complex financial instrument.
The sports chain’s total interest in the ailing department store group has risen from 11.2% to 12.7% after it sold a 4.6% stake bought last month and swapped it for a put option agreement which gives Sports Direct influence over shares equivalent to 6.1% of Debenhams.
The share sale is likely to have netted a profit for Sports Direct of around £2m.
The put option instrument gives Sports Direct the right to take ownership of 74.2m shares at a set price in future. The financial arrangement, effectively a bet on a rise in the price of Debenhams shares, could cost Sports Direct a maximum of about £46m.
The latest move almost exactly echoes Sports Direct’s actions in January when it bought a 4.6% stake and then sold it less than a week later when it invested in a put option arrangement over a 6.6% stake in Debenhams.
The two deals are likely to be intended to apply pressure on Debenhams management team as it considers closer ties with Sports Direct. The sports specialist currently has four concession areas within Debenhams stores and is also thought to want to introduce its fashion brands, such as Firetrap and Kangol, into the department store.
“Sports Direct continues to work together with Debenhams and looks forward to building a long-term relationship,” the company said in a statement.
The Sports Direct concessions are part of Debenhams’ attempt to fill 1m sq ft of its space with more productive alternatives. It is also trialling concessions from Costa Coffee, Mothercare and Monsoon.
Ashley has a history of taking stakes in companies under stress in a bid to influence the business. Previously Ashley was able to force talks with outdoorwear retailer Blacks Leisure, and now defunct rival sports chain JJB Sports, by snapping up chunks of shares in the businesses which were both formerly listed on the London Stock Exchange. In September, Sports Direct entered into a deal with Goldman Sachs over 23m shares in Tesco, equivalent to about 0.3% of the supermarket’s stock. The put option is effectively a £43m bet that shares in the troubled supermarket will recover.
