Struggling Debenhams on Tuesday warned that a Sports Direct bid for the company won’t fix its funding crisis as it moved to fend off a takeover.
The department store chain said it would consider any offer from Mike Ashley’s Sports Direct, its largest shareholder, but added it would not “address its immediate funding needs”.
Sports Direct stepped up the pressure on Debenhams last night, saying it was considering a cash bid after it made several offers to the board to help keep the chain afloat.
The chain, valued at £27 million, on Tuesday demanded clarity on the price and how Sports Direct would pay for its debt.
Debenhams is seeking a £200 million cash injection from its lenders as part of a restructuring plan that could see existing shareholders, including Sports Direct, wiped out. Securing the capital is vital for its survival. Debenhams has a £560 million debt pile. It added on Tuesday it “will continue with its plan to obtain the funding required”.
Under takeover rules, Sports Direct now has until the end of April 22 to make a formal bid or walk away. Debenhams shares rose 42%, or 0.6p, to 2p as Sports Direct edged up 2p to 284p.
“Ashley’s in a race against the clock because Debenhams is in the process of refinancing its debt, which will give its creditors even greater control of the company,” said Hargreaves Lansdown’s Laith Khalaf.
“If Mike Ashley wants to make this stick, he needs to come out with an offer pretty quickly, along with a plan to meet Debenhams’ immediate funding needs.”
Separately fashion website MySale, in which Sports Direct has a 4.8% stake and fellow retail tycoon Sir Philip Green is an investor, warned on profits on Tuesday.
The AIM-listed firm continued to suffer from tax changes in Australia and heavy discounting in the industry. Full-year revenues are expected to be “materially” lower than previous guidance.
The City had forecast sales of A$257.8 million (£139 million) and a $4.5 million pre-tax loss. First half revenues fell 17% to $126 million.
Shelton Capital, the investment vehicle of Green’s wife, has a 22% stake in MySale.
