The shares of Debenhams (LSE: DEB) jumped 6% to 86p in early London trade this morning after the retailer announced that Mike Ashley’s Sports Direct (LSE: SPD) had acquired a stake in the company worth almost £50m.
The transaction makes Sports Direct a 4.63% owner of Debenhams, in a deal that has taken the market by complete surprise. Investors weren’t the only ones taken aback by the news — the shares were bought without the prior knowledge or consultation of the Debenhams board.
In a statement following the shares’ acquisition, Sports Direct commented:
“Sports Direct wishes to explore options at an operational level to work together with Debenhams to create value in the interests of both Sports Direct’s and Debenhams’ shareholders. This acquisition of shares has taken place without the prior knowledge of the Debenhams board of directors, but Sports Direct has communicated to Debenhams’ board its desire to work together and its intention to be a supportive shareholder.”
Replying to this notification, the Debenhams board publically responded:
“Debenhams notes that Sports Direct intends to be a supportive shareholder and that it wishes to explore options at an operational level to work together. Debenhams is open minded with regard to exploring operational opportunities to improve its performance, alongside its own existing and planned initiatives, in order to create value for all Debenhams shareholders.”
With a market cap of £1bn, Debenhams is now more than four times smaller than Sports Direct.
Of course, whether this deal is good news for shareholders of either company is for you to decide.
