Mike Ashley has abandoned his takeover approach for Blacks Leisure, the outdoor retail specialist, citing a lack of clarity over certain suppliers' intention to boycott trade with his Sports Direct chain.
The announcement yesterday came just 24 hours ahead of a Takeover Panel deadline for Sports Direct to make a firm bid and triggered a sell-off in shares in Blacks Leisure, which fell by 7.5p, or 11.1 per cent, to 60p.
This is the second time in a year that Mr Ashley, the deputy executive chairman of Sports Direct and boss of Newcastle United Football Club, has walked away from a potential bid for Blacks Leisure.
Earlier this month, Sports Direct, which has a 28.5 per cent stake in Blacks, made an indicative 62p a share offer for the outdoor retailer, which Blacks rejected as "wholly inadequate".
Its decision came after reports that a number of Blacks' suppliers would not supply the sports clothes and equipment chain, best-known for its "pile 'em high, sell 'em cheap" model, if Mr Ashley was in control of it.
North Face, which accounts for about 26 per cent of Blacks' sales, is one of the suppliers that is thought to have had concerns its brand would be tarnished by an association with the discount retailer Sports Direct. It is also believed that North Face cited the weak performance of Field & Trek, another outdoor retailer, which suffered falling sales and a loss of £2m in its first full year after it was acquired by Sports Direct in 2007.
In a letter sent last Friday, Sports Direct alleged that Blacks had been "selectively disclosing information" about suppliers who had threatened to boycott the chain founded by Mr Ashley. But Blacks denied it had broken takeover rules with such action and referred the letter to the panel.
In a statement, Sports Direct yesterday said: "Without clarification in relation to this issue, Sports Direct has been unable to finalise its views on the value of any potential offer. Accordingly, Sports Direct has determined that it would not be in its shareholders' interests to make an offer for Blacks at this time."
Mr Ashley cannot now make another takeover approach inside the next six months, unless a third party throws its hat into the ring.
Blacks said the process had been an "unwelcome distraction" and was "pleased that this period of uncertainty has come to an end". It said: "The board of Blacks will now be able to focus completely on the implementation of a fundraising which it considers to be in the best interest of all shareholders."
Blacks intends to use the £20.3m fundraising – which does not require Sports Direct's support – to open new stores, refurbish existing ones and cancel certain debt facilities.