Mike Ashley has ramped up his efforts to gain control of Debenhams as the department store chain puts in motion plans to secure £200 million in new funding.
The retailer has also announced it will pursue a restructuring plan in a move which could wipe out existing shareholders, including the Sports Direct founder.
Following the announcement, Sports Direct issued a statement saying it had offered to buy Debenhams’ Danish business, Magasin du Nord for £100 million.
The terms of the deal would involve installing Mr Ashley as chief executive of Debenhams, to assist in its restructuring process.
It would also allow Debenhams to buy back the business at the same price in 12 months, and could even sell it to another bidder at a higher price.
“Sports Direct believes its proposal would provide additional management and first-class leadership to Debenhams through this challenging period of restructuring, together with additional funding,” the company said.
Debenhams later said the offer did not address the company’s funding and restructuring requirements, and Mr Ashley’s appointment as chief executive would be a conflict of interest given his ownership of House of Fraser.
It added it has provided guidance on how Sports Direct can participate in the refinancing, but this has been “repeatedly ignored”.
Sports Direct said in its statement that it had invited further details on valuation if the company believes the business to be worth more.
Debenhams on Friday launched a consent solicitation for its lenders in a bid to secure up to £200 million, a higher amount than previously thought.
If successful, the retailer will also embark on a restructuring in an effort to “secure the future of the business”.
Options are thought to include a debt-for-equity swap and a pre-pack administration, with the latter expected to be more likely as it does not require shareholder approval.
Both options would result in existing investors, including Sports Direct, losing their holdings in the company.
A company voluntary arrangement (CVA) to speed up store closures and rent reductions could also be part of the plans, or come at a later stage.
Shares in Debenhams dropped as much as 91% in early trading on Friday, hitting a low of 0.25p.
By the close, shares had fallen 45% to 1.59p.
Mr Ashley, who owns just under 30% of Debenhams through Sports Direct, has been trying to oust the high street chain’s board and install himself in their place.
On Thursday, he reiterated his call for a shareholder vote on the proposal, which would see all directors except finance boss Rachel Osborne kicked out.
He already ousted former chairman Sir Ian Cheshire from the company in January by teaming up with fellow shareholder Landmark to vote against his re-election.
Chief executive Sergio Bucher was also removed as a director but has remained in his post for the time being.
Mr Ashley had also offered Debenhams a loan, which it said would be considered.
Debenhams said last week that it was in talks with lenders to secure a new loan, part of which will pay down a bridging loan that it announced in February.