Sports Direct share price sinks after founder cuts stake

(Refiled to correct typographical error in paragraph 2 and delete extraneous text at end of story)

By Neil Maidment

LONDON, April 8 (Reuters) - Shares in Sports Direct (Frankfurt: A0MK5S - news) , Britain's biggest sporting goods retailer, fell by over 10 percent on Tuesday after its founder Mike Ashley cut his stake and raised over 200 million pounds ($332 million).

The sell-off, which cuts Ashley's stake by 4 percent to 57.7 percent, follows the surprise decision last week by the remaining Sports Direct investors to oppose a proposed bonus share scheme for Ashley worth 73 million pounds, the third time such a payout plan has failed.

It also comes as investors try to understand the tactics behind the firm's surprise purchase of an 11 percent stake in British department stores operator House of Fraser, which emerged at the weekend.

Shares in Sports Direct, which have more than doubled in a year, were down 10.7 percent at 798 pence at 1121 GMT, wiping over 570 million pounds ($947 million) off its market value.

Ashley, who rarely gives interviews and is known for taking stakes in his rivals, paid around 20 million pounds to buy businessman Tom Hunter's stake in House of Fraser after China's Sanpower Group agreed to acquire 89 percent of the group in a deal worth over 450 million pounds, including debt.

A statement on Tuesday from China's Nanjing Xinjiekou Dept Store, the listed retail arm of Sanpower Group, said it was preparing to sign the deal shortly and that it planned to set up a wholly-owned subsidiary in the UK to acquire the stake.

Ashley is known to have long held an interest in buying House of Fraser, although any attempt to derail Sanpower's move looks to have failed with the transaction expected to complete this week, according to a source close to the deal.

"House of Fraser has noted the share sale by Tom Hunter to Mike Ashley. We have sent legal letters to both parties, reminding them of the proper procedures to transfer shares, which have not been followed," the company said in a statement.

"This situation has no impact on our plans to sell to Sanpower and we will be making an announcement in due course."

House of Fraser said that pre-emption rights meant Hunter was obliged to formally offer his shares to existing shareholders before selling to an outside party. If this procedure is found not to have taken place then Ashley could face having to return his holding back to Hunter.

Sports Direct would not comment on the transaction. Tom Hunter could not immediately be reached.

Ashley's sale of 24 million Sports Direct shares at 850 pence each, confirmed on Tuesday, was not linked to the House of Fraser acquisition, according to another source familiar with the situation, but instead designed to increase the free float in Sports Direct shares based on demand from institutional investors.

Executive Deputy Chairman Ashley, who founded Sports Direct in 1982, has a stake now worth around 2.77 billion pounds but has yet to be paid a salary or bonus from the firm.

The share sale and House of Fraser deal are the latest in a long line of surprise moves by Ashley, whose maverick management style has helped his Sports Direct empire grow rapidly in recent years.

In January he kicked off the new year with another surprise move, selling a stake just bought in British department store Debenhams (Other OTC: DBHSY - news) for a profit of about 4.6 million pounds and betting on its share price holding up with a complex option deal. ($1=0.6020 pounds) (Editing by Greg Mahlich)