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Sports Direct rules out Debenhams bid after shares rise on director comments

LONDON (Reuters) - Britain’s Sports Direct officially ruled out a takeover bid for Debenhams on Wednesday after an outgoing director of the sportswear firm said the board had discussed combining the department store group with House of Fraser.

FILE PHOTO: Shoppers walk past Debenhams on Oxford Street in central London, Britain, April 2, 2018. REUTERS/Hannah McKay/File Photo

Sports Direct, controlled by founder and billionaire Mike Ashley, bought department store chain House of Fraser out of administration for 90 million pounds ($117 million) last month. The firm also owns a 29.7 percent stake in Debenhams, which has issued three profit warnings this year.

Analysts have speculated that Ashley might want to put the two department store groups together.

Earlier on Wednesday Debenhams shares rose over 9 percent after Simon Bentley, who prior to the conclusion of Sports Direct’s annual shareholder meeting in central London had been the firm’s senior independent director, was asked if its board had talked about the possibility of combining House of Fraser and Debenhams.

“It’s been discussed,” he told reporters.

But Bentley said Sports Direct was currently busy with its latest acquisition.

“If any of you had the job of handling House of Fraser right now, I think you might have your hands full, and incidentally we’ve also got Sports Direct,” he said.

“If there’s opportunities in the future then we’ll be in a position to take advantage of them.”

Bentley later issued a clarification statement.

“I made no mention of any merger between House of Fraser and Debenhams, nor did I intend my answer to infer that,” he said.

Amid the confusion, after the market closed Sports Direct issued a statement to the London Stock Exchange, saying it did not intend to make an offer for Debenhams. Under UK takeover rules that effectively rules out Sports Direct from making a bid for six months, subject to various caveats.

Earlier this week Debenhams rushed out a trading statement and denied it was actively planning major store closures.


Ahead of the investor meeting Sports Direct announced that Bentley was retiring as a director of the company, having served on the board since 2007, and would not seek re-election.

Sports Direct also said its under-fire chairman Keith Hellawell was stepping down after nine years in the role.

Ahead of the meeting three shareholder advisory groups - Pensions & Investment Research Consultants, Institutional Shareholder Services and Glass Lewis & Co - had urged investors to vote against the re-election of Ashley and Hellawell, over Sports Direct’s alleged poor corporate governance and continuing concerns about employment practices.

Hellawell, a 76-year-old former police chief constable, has previously battled to keep his job at the retailer in the face of criticism of its working practices and his own ability to control Ashley.

He narrowly won re-election a year ago after independent shareholders defeated him in two previous votes when Ashley used his 61 percent holding to ensure his survival.

He will be succeeded as chairman by non-executive director David Daly, a former Nike executive.

The re-election of Ashley, who unexpectedly attended the meeting, was opposed by 9.78 percent of votes cast. Ashley did not speak.

The meeting, attended by about 30 shareholders, lasted about 10 minutes with no questions asked by investors.

Sports Direct said earlier on Wednesday its trading was in line with previous guidance. It has forecast a 5-15 percent improvement in core earnings for the current financial year.

Shares in the firm closed up 3.5 percent.

($1 = 0.7699 pounds)

Reporting by James Davey; Editing by Georgina Prodhan/Elaine Hardcastle