The Sports Direct chain controlled by the billionaire owner of Newcastle United football club said on Friday night it had agreed a so-called put-option deal with Goldman Sachs over a 10.5% stake in Debenhams. The deal replaces an agreement covering a 6.6% holding that was announced this time last year.
The punt is the latest throw of the dice by the unpredictable tycoon, who on Tuesday sold a 2.6% stake, worth £117m, in the company he founded.
The use of the complex financial instrument means that if the Debenhams share price is less than the agreed exercise price when the contract expires, Sports Direct could be required to buy the stake – the equivalent of 128.9m shares – at that price. If the price rises above the exercise price, Sports Direct receives the premium but has no further obligations. It has set up a similar deal over Tesco shares.
Sports Direct said its maximum exposure under the new put-option was approximately £85m; however it already has £46m on the table to cover another put-option, this time relating to a 6.1% stake in Debenhams, that was struck in November. Together the investments represent a 16.6% interest in the department store chain’s shares.
Experts say buying put-options is a way of gaining access to a sizable stake in a company without tying up capital.
In a statement issued after the stock market had closed, Sports Direct said it had no intention of making an offer for Debenhams. In the past Ashley has described these financial plays as part of a “wider conversation” with the target company – both Debenhams and Tesco have recently allowed Sports Direct to put outlets in some of their spare retail space.
“Sports Direct does not intend to make an offer for Debenhams and would encourage the Debenhams’ leadership team to concentrate fully on delivering their strategic plans,” it said.
guardian.co.uk © Guardian News and Media Limited 2010