Sports Direct said in a statement on Wednesday morning that it is considering making an offer of 5p per share for Debenhams, which would value the retailer at £61.4m ($81m). It would represent a premium of 127% on Debenhams closing price on Tuesday evening.
As part of the possible bid, Sports Direct would help Debenhams with its funding requirements but only if Sports Direct founder Mike Ashley were installed as CEO of the department store.
“This is not conventional corporate behaviour by any means, but that’s what we’ve come to expect from the Sports Direct CEO,” Laith Khalaf, a senior analyst at Hargreaves Lansdown, said in an email. “What we haven’t had from either Mike Ashley or Debenhams is a strategic plan for the long term future of the company, and today that still remains sadly lacking.”
Shares in Debenhams jumped by as much as 80% to over 4p in response to Sports Direct’s statement. They had settled back down to a rise of 56% to 3.4p at just before 9am.
The possible bid is the latest attempt by Sports Direct and Mike Ashley to take control of the struggling retailer. Sports Direct is Debenhams biggest shareholder, with a just under 30% stake.
Ashley has been pushing since late last year for more control of the business and offering cash to help support it in return. Debenhams management have consistently rebuffed his attempts to influence the company.
Ashley ousted CEO Sergio Bucher and chair Sir Ian Cheshire from the board in a January coup and has called for a shareholder vote to oust almost all of the board of directors and instal himself as CEO.
The attempt to wrestle control of the business comes as Debenhams has suffered a serious downturn in performance that has left it fighting for survival. Debenhams has put out four profit warnings in the last 18 months, the most recent in January, and is struggling to reduce its £286m debt pile.
The department store has been engaged in emergency funding talks with its existing lenders to raise an additional £200m but it warned last week that the deal could wipe out equity investors.
Sports Direct said on Wednesday that its possible proposal “would offer fair and full value for Debenhams. It does not believe that Debenhams has the same value if it is (in effect) handed over to Debenhams’ existing lender group.”
Debenhams has not yet responded to Sports Direct’s latest statement. However, the retailer said in a separate statement late on Tuesday that it would give “due consideration” to any bid from Sports Direct. However, it said it would continue with emergency fundraising plans given the liquidity crunch it faces.
Debenhams has been battling with the rapid shift of retailing from the high street to online. Department stores are struggling with high fixed costs that leave them unable to reduce outgoings as sales fall.
Rival department stores BHS and House of Fraser have both gone bust in recent years. Ashley bought House of Fraser out of administration last year.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.