Debenhams declines Mike Ashley’s last crooked recovery plan
Debenhams has refused its offer to inject £150m into the concerned department store chain, says Sports Direct Mike.
Mike owns more than 60% of Sports Direct. The condition on which Mike Ashley tabled the ransom bid was he be made chief executive of DebenhamsRetail tycoon.
Mike was locked up in an acrimonious battle with Debenhams’ board for control of the business and has accused its executives of “a sustained programme of misrepresentations and refusals.
Debenhams’ rejection is leading it to go into administration this week. Well, the firm is all set to go through a pre-pack administration, which would discuss current shareholders( including Mr. Ashley) who owns nearly 30% of the chain, are to be wiped out.
Although the shops will continue trading, currently Debenhams has proposed closing around 50 branches from next year and renegotiating rents with landlords to overcome its funding problems.
Proposed offer to take over
In a statement, Direct Sports said it was unhappy with the response to its proposal to raise £150m by issuing new shares, which would also have seen lenders write off £148m of the chain’s debt.
Still, the retailer held on saying it was giving active consideration to a separate offer, first proposed in March, to take over Debenhams by purchasing existing shares. It’s been an extraordinary fight for control of Debenhams.
Barring for the climax twist, Mike Ashley has found himself on the losing side. His latest 11th-hour proposal has been declined by lenders.
As the retailer seems to have no much choice. Eventually, it had £560m of debt and its creditors are now definitely calling the shots. Despite three billion pounds of sales last year, now the business worth less than £30m as its share price has plunged to less than 2p.
Well, the board believes the best option is to be rescued by its lenders. Expecting this set to take the form of a pre-pack administration. An announcement could come as early as Tuesday.
As per the report, It will be business as a standard for its shops and staff. But store closures down the line are inevitable. Debenhams has previously said it required to shut 50 stores in the coming years. That plan will now be expedited, with up to 20 expected to go in early 2020 through a restructuring means with landlords.
In its newest swipe at Debenhams management, Sports Direct summoned for an investigation and for the firm’s shares to be suspended.
However, a strong statement cited Debenhams’ board members of misleading what had occurred in a meeting between the two firms and drove them to undergo lie detector tests. The struggling department store, which has 165 stores and employs about 25,000 people, registered a record pre-tax loss of €491.5m last year.
For instance, if Mr. Ashley gains control of Debenhams, he would control yet another High Street name.
As well as Sports Direct, Mr. Ashley runs House of Fraser, Evans Cycles and Flannels.
Mr. Ashley entered investor Landmark Group in January, to vote the retailer’s chairman and chief executive of the board.
Meanwhile, the High Street retailers have been under rising pressure as more people prefer to shop online and visit stocks less.