UK department store chain Debenhams has called on the competition watchdog to intervene in an attempted boardroom coup by the Sports Direct and House of Fraser boss, Mike Ashley.
Ashley used a stock market announcement to call a Debenhams shareholder meeting to oust nearly all the company’s directors and install himself as chief executive.
The retail boss said he was calling a general shareholder meeting as he wanted to seize control of Debenhams “during this business-critical period” and all directors would be ousted except for the department store’s finance director, Rachel Osborne.
The stockmarket statement said if successful in his bid to get on the Debenhams board, he would be succeeded at Sports Direct by Chris Wootton, currently its deputy chief financial officer.
It said a fuller statement on Sports Direct’s reasons for calling a Debenhams shareholder meeting in order to install Ashley as boss would follow “in due course”.
It is understood that Debenhams has raised concerns with the Competition and Markets Authority (CMA) about the potential concentration of control in the hands of Ashley, whose Sports Direct empire owns House of Fraser and a near-30% stake in Debenhams.
Half of Debenhams shoppers also shop in House of Fraser, which stocks 90% of the rival department store group’s beauty offering. Both chains also stock the same fashion brands including Phase Eight, Oasis, Ted Baker and Coast.
The CMA has so far declined to comment on whether it was looking at the matter.
Sports Direct pledged that, if appointed to lead the department store, Ashley would step down from his role as chief executive of the sports and retail group which he founded and controls via a 61.5% stake.
The attempt at a boardroom coup comes after a series of attempts by Ashley to wrest control of Debenhams without launching a formal bid. His efforts have stepped up since buying department store House of Fraser out of administration in August last year.
Ashley is thought to have moved to oust the board via a shareholder vote after he met with Debenhams bondholders and was unable to persuade them to install him as chief executive.
RPA Perspective Debenhams is attempting to refinance £520m in debt facilities before the end of April. The debt includes £320m of loans and £200m of bonds, which are due to be repaid next year. A deal is expected to include a debt for equity swap and 50 store closures.
With uncertainty around the terms of the deal, Ashley is hoping to win over shareholders and oust directors or put himself on the board. Ashley would need the support of 50% of voting shareholders.
In January he was able to successfully remove Debenhams chairman Sir Ian Cheshire by teaming up with fellow shareholder Milestone Resources, controlled by the Dubai-based retail entrepreneur Micky Jagtiani, who owns a 7% stake.
Although they together own less than 40% of Debenhams’ stock, fewer than 70% of the company’s shareholders voted, which meant that Milestone and Sports Direct controlled more than half the voting stock.
Ashley may not have to win many investors over to his plan because about 20% of Debenhams’ voting stock is held by small shareholders via investment platforms run by groups, such as Hargreaves Lansdown, which means their votes often go unused.
Debenhams said: “The board has been engaging with Sports Direct and our other stakeholders and is disappointed that Sports Direct has taken this action. In the meantime, we remain focused on delivering the restructuring of our balance sheet, and our discussions are well advanced.”
Gaining control of Debenhams would be the latest addition to Ashley’s empire, which already includes the House of Fraser department store chain, Flannels designer retailer, Evans Cycles and the recently acquired Sofa.com.
In recent weeks, Debenhams’ board has attempted to get Ashley on side by giving him access to limited financial information about the store chain after he signed a non-disclosure agreement.
