Financial News

  • 17 January 2014, 8:06

Sports Direct Takes £64m Bet On Debenhams

Sports Direct has dumped its Debenhams stock, bought just days ago amid a pledge to be a supportive investor, and taken a £64m punt on its share price instead.

The sportswear empire of Newcastle United owner Mike Ashley confirmed on Monday it had snapped up a 4.6% stake through the stock market purchase of 56.8 million shares, worth around £46m.

The purchase was made without the prior knowledge of the Debenhams board but Sports Direct said at the time it hoped the pair could work together to improve the department store chain's performance following a troubled Christmas period that saw its chief financial officer quit just two days after issuing a profits warning.

But Sports Direct confirmed in a stock market announcement on Thursday that it had disposed of its 4.6% interest in Debenhams and instead entered a so-called  'put option' agreement to buy a 6.6% stake, which would activate should the Debenhams share price fall to a certain level.

It said the group's maximum exposure under the time-sensitive agreement was £64m.

Given the price of Debenhams' shares at the times of both their purchase and subsequent sale, Sports Direct could have made almost £5m on the off-loading of its 4.6% stake.

Its statement on Thursday also said it remained intent on working together with Debenhams and intended to be a "supportive stakeholder and create value".

Debenhams had said on Monday it was open-minded about the investment by Sports Direct.

However, it is yet to confirm any prospect of a working relationship as Sports Direct said it was still to meet the senior management team.

Sports Direct has a history of buying strategic stakes in other retailers, most recently JJB Sports, and is the current owner of a near 12% holding in rival JD Sports Fashion.

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