The billionaire Mike Ashley now controls 12.7 per cent of Debenhams through his Sports Direct retail empire, as the businessman set up a complicated bet on the department store’s future performance.
Last night Sports Direct sold a 4.6 per cent stake bought last month for around £33.8m, making a tidy £2.3m profit after the shares rose more than 6 per cent over the month.
In its place the company, controlled by Mr Ashley, set up a so-called put option with an unknown third party, placing a bet on Debenhams’ future share price – something he had previously done in January.
At the start of the year, the original put option represented a bet by Sports Direct that Debenhams’ shares would fall. However, it is not known whether this latest bet is on the company improving or declining.
It means that, in total, Sports Direct has control over 12.7 per cent of Debenhams.
Mr Ashley, who is a keen gambler, made a similar bet on Tesco shares earlier this year – in that case betting the shares would rise. However, the supermarket has since been placed under investigation by the Serious Fraud Office over accounting irregularities, and still has eight directors suspended.
On the back of the original Debenhams bet in January, Sports Direct got a seat at the table to launch a series of concessions inside the department store chain. It now has four stores within stores, with more planned.
Yesterday’s put deal means that Sports Direct – which has made the bet with an unknown third party for an unknown period – has the option to buy Debenhams shares at a set price. When the period ends, Sports Direct can either buy the shares at the originally agreed price, or pay the cash difference to the third party.
If Debenhams shares are above the set price at the end of the bet, Sports Direct pockets a premium and does not need to buy the shares. The most that Mr Ashley’s company could end out paying out is £64m, but only if Debenhams went bust and the shares became worthless.
Sports Direct said: “We continue to work together with Debenhams and look forward to building a long-term relationship.”
Mr Ashley has always shown a fondness for department stores and had been linked with taking over House of Fraser, before it was sold to a Chinese consortium. However, he did manage to buy an 11 per cent stake before the sale.Reuse content