Struggling department store Debenhams has revealed that it will press ahead with its £200 million restructuring plan just hours after Sports Direct boss Mike Ashley announced that he was preparing a multi-million-pound bid for the company.
Yesterday, Wednesday 27 March, Mr Ashley revealed that he was considering a £61.4 million bid to take full control of Debenhams, of which he already owns a 29.7 per cent stake in.
The offer would have saved Debenhams from a refinancing deal set to “wipe out” the value of existing shares, including Mr Ashley’s.
However, in an announcement today, Thursday 28 March, the retailer said it would push ahead with plans to raise £200 million from existing lenders, including Barclays, HSBC and the Bank of Ireland.
According to the report, the majority of shareholders have “provided consent to the amendments sought to the existing notes”, including tweaks to the 5.25 per cent senior notes due in 2021, which would allow the multi-million-pound refinancing deal to go ahead.
It is believed that Debenhams has until 5pm today to accept the offer.
Commenting on the offer put forward by Mr Ashley, Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “The Debenhams board are bound by their duty to shareholders to give this proposal proper consideration, though it’s not as yet a firm offer for the company.
“This is not conventional corporate behaviour by any means, but that’s what we’ve come to expect from the Sports Direct chief executive.
“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.”
The retailer has previously snubbed Mike Ashley on a number of occasions, including an offer of a £150 million loan as well as a £100 million offer for the company’s Danish arm.
Regardless of how Debenhams proceeds, the company will still struggle to stay afloat with rising costs and aggressive online competition.
In recent attempts to cut the retailer’s costs, it has since terminated its commercial property lease at Regent’s Place – which was due to run to 2038 – and move its headquarters back to Oxford Street. According to reports, the relocation will deliver “a material saving” in its annual rent bill of £230 million. The board also plans to make further cost savings of £80 million by 2020.
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