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Sports Direct withdraws Debenhams bid

Sports Direct has said it will not make a formal bid for Debenhams after the department store chain entered a pre-pack administration earlier today.

Chad Griffin, Simon Kirkhope and Andrew Johnson of FTI Consulting were appointed as joint administrators of Debenhams PLC today, wiping out equity for shareholders including Sports Direct.

Sports Direct had until 5pm on 22 April to announce either a firm intention to make an offer for Debenhams, or that it does not intend to make an offer.

The sportswear-focused retail group, run by Mike Ashley, said it does not intend to make an offer to acquire the entire issued and to-be-issued ordinary share capital of Debenhams.

However, it reserves the right to make or participate in an offer for Debenhams within the next six months.

Following the pre-pack, Debenhams’ operating companies were immediately sold to a new company owned by its lenders and are continuing to trade as normal. This includes the chain’s 166 stores.

Debenhams’ lenders paid £101.8m for the group and took on £520m of debts and its pension obligations, taking the total cost to £621.81m.

There are provisions for Debenhams to be sold on immediately for a price that would repay Debenhams’ debts and secured pension liabilities in full, and potentially yield a return for shareholders.

On 29 March, Debenhams agreed a £200m refinancing deal with its existing lenders. The retailer has received the first facility of £101m. The remaining £99m was conditional on Sports Direct – which owns 29% of Debenhams – or another major (25%-plus) shareholder making a “firm and binding offer” for Debenhams, 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 Ashley as CEO of the department store.

The deadline for either option was 8 April, or Debenhams would enter administration.

Sports Direct tabled a last-minute £150m cash bid for Debenhams on 8 April on the condition that Ashley was named CEO. Debenhams rejected the offer.

In the early hours of this morning, Sports Direct made a revised proposal to Debenhams, offering to underwrite a £200m pre-emptive equity issuance to existing Debenhams shareholders. However, Debenhams said the offer was “highly conditional” and that it was “not sufficient to justify an extension to the deadline”.

 

 

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