Sports Direct has said it is “disappointed” that Debenhams has rejected its latest offer of £150m cash injection for the struggling department store.
In a letter to the Debenhams board sent on 5 April – just days before Sports Direct’s 8 April deadline from Debenhams’ lenders to make a bid for the business – Ashley offered to underwrite a £150m rights issue to save the business from a pre-pack administration.
Sports Direct has said it has today received a letter from Debenhams rejecting the proposal, which it said “should have been deliverable with the co-operation of Debenhams and its existing lenders”.
The group has called on the Debenhams board and its lenders to “actively engage in negotiations”, as there is a “likely significant and negative impact on Debenhams’ current shareholders and other stakeholders, including suppliers and employees.”
Sports Direct added in a statement: “Notwithstanding Debenhams’ rejection of Sports Direct’s proposal in relation to the equity issuance, Sports Direct continues to actively evaluate all possible options to support Debenhams. Accordingly, Sports Direct continues to give active consideration to its pre-conditional possible offer for Debenhams at 5p in cash per ordinary share announced on 25 March 2019.”
Sports Direct has until 5 pm on 22 April 2019 to either announce a firm intention to make an offer for Debenhams or declare that it does not intend to make an offer.
Debenhams declined to comment.
On 29 March Debenhams agreed a £200m refinancing deal with its existing lenders. The struggling department store chain has received the first facility of £101m. The remaining £99m is conditional on Sports Direct – which owns 29% of Debenhams – or another major (25%-plus) shareholder making a “firm and binding offer” for the retailer, which must include an agreement to refinance its £560m group debt.
Alternatively, Sports Direct could provide funding for Debenhams in the form of equity or a loan known as a “subordinated debt instrument”, and cancel its request for an extraordinary general meeting (EGM) to appoint its boss, Mike Ashley, as CEO of the department store.
If neither happens by 8 April, Debenhams will enter a pre-pack administration.