Debenhams Plc once again brushed off billionaire Mike Ashley, who holds almost a third of the ailing department-store operator, saying a proposal to buy the company wouldn’t solve its funding problems.
Ashley’s Sports Direct International Plc said late Monday that it may make a cash offer to buy all the Debenhams shares it doesn’t currently own, as well as new stock.
The shift in strategy reflects Ashley’s increasingly desperate efforts to salvage his investment and avert a debt restructuring that would hand control to lenders and potentially wipe out equity investors. Sports Direct previously said it would be interested in rescuing Debenhams out of insolvency, as it did with rival department-store chain House of Fraser last year.
Sports Direct’s approach appears to be a “last-ditch attempt to remain in the race for control of Debenhams,” Louise Parker, an analyst at Bloomberg Intelligence, said in a note.
Ashley appealed to shareholders to back his new plan. Debenhams said Tuesday that there is no certainty Sports Direct will deliver a concrete offer and any such bid would need to address the company’s immediate funding requirements and repay up to 560 million pounds ($738 million) of debt. The board will nonetheless consider an offer if it’s made, the company said.
Debenhams’s stock-market value has dwindled to just 26 million pounds. The shares surged as much as 52 percent in London trading in response to the Sports Direct announcement, bouncing back to their highest level since March 21, the day before the company said it was discussing a 200 million-pound funding package with creditors that could wipe out shareholders.
Others are gambling on the share price resuming its descent. Hedge-fund owner Crispin Odey disclosed a short position in Debenhams shares of 7.87 percent in a statement Tuesday.
Sports Direct has until April 22 to make a formal offer. The department-store chain has said it will continue to seek approval from bondholders for a creditor-led restructuring plan in the meantime. It aims to receive approval by 5 p.m. on Thursday.
Sports Direct rose about 2.2 percent to 288.20 pence in London trading. Debenhams’s 200 million pounds of bonds fell about 1 pence on the pound to 40 pence, the lowest since the notes were sold in 2014, according to Bloomberg data.