Struggling retailer Debenhams has said it will give any firm takeover offer from Mike Ashley’s Sports Direct “due consideration” but added it would not solve its mounting funding crisis.
Sports Direct said after market close on Monday it was considering making an offer to buy Debenhams to save the beleaguered department store chain.
But Debenhams responded on Tuesday, confirming that while it would look at any approach made it would continue with its own funding plans.
It said given the “timetable associated with any public offer”, a bid from Sports Direct would not address its immediate financing needs.
Sports Direct now has until 5pm on April 22 to announce a firm intention to make a bid or walk away, under City takeover rules.
Debenhams shares rose more than 40% in morning trading, reaching as high as 2.4p, while Sports Direct shares edged 1% higher.
The group added any proposal from Sports Direct must provide an indication of the offer price, a clear plan of how Debenhams’ existing debt will be repaid and how it would address the immediate funding needs.
It also acknowledged a new request from Sports Direct on March 21 calling for a shareholder meeting.
In its announcement late on Monday, Sports Direct said it was considering an outright offer to take over Debenhams as it said the chain’s financing plans “would result in an adverse outcome” for existing shareholders.
Sports Direct had earlier hit out at Debenhams for rejecting an offer to buy the chain’s Danish business, Magasin du Nord, for £100 million – one of several offers it has made to put the department store chain on a more secure footing.
It added its proposals are better than the “multiple insolvency processes” Debenhams is considering as it looks to restructure.
As part of the plan, Mr Ashley, who owns just under 30% of Debenhams, would have installed himself as chief executive of the ailing high street firm.
Mr Ashley, who is Debenhams’ largest shareholder, has been seeking control of the group and had offered to lend it £150m or buy its Danish subsidiary.
Debenhams rebuffed these offers and is pursuing its own refinancing plan.
But on Friday it admitted existing shareholders could be wiped out by the proposals.
Laith Khalaf, senior analyst at Hargreaves Lansdown: “This is a sign Mike Ashley isn’t making progress taking control of Debenhams by any other means and so a takeover bid may now be his last resort.
“Ashley’s in a race against the clock, however, because Debenhams is in the process of refinancing its debt, which will give its creditors even greater control of the company.”
He added: “If Mike Ashley wants to make this stick, he needs to come out with an offer pretty quickly, along with a plan to meet Debenhams’ immediate funding needs.”