Frasers confirms talks on potential Debenhams rescue bid

(Sharecast News) - Mike Ashley's Frasers Group confirmed it was in talks with administrators of retail chain Debenhams on a potential rescue, but warned "time is short" to do a deal.
The group, which owns Sports Direct and House of Fraser, revived its interest in Debenhams over the weekend, after JD Sports pulled from acquisition talks last week and placed the 242-year-old retailer on the verge of liquidation.

Whilst Frasers Group hoped that a rescue package could be put in place and jobs saved, "time is short and the position is further complicated by the recent administration of the Arcadia Group, Debenhams' biggest concession holder," the company said on Monday.

"There is no certainty that any transaction will take place, particularly if discussions cannot be concluded swiftly."

Debenhams administrators started the winding down process last week, putting 12,000 jobs at risk across 124 stores. Liquidators are clearing stock after the potential rescue deal with JD Sports collapsed.

Administrators have been trying to find a buyer for the troubled group since April, but last week admitted that the sale process had "not resulted in a deliverable proposal".

The collapse came within hours of Philip Green's Arcadia Group - owner of Topshop, Miss Selfridge and Dorothy Perkins - entering administration, threatening a further 13,000 jobs.

Arcadia was biggest the concession retail holder in Debenhams stores, triggering JD Sports decision to pull out of discussions.

Ashley has long had his eyes on Debenhams and previously built up a near-30% stake in the business, which was wiped out last year in a debt restructuring deal with the department store's lenders.

Shore Capital analysts Clive Black and Greg Lawless said this would be Ashley's "last play" on Debenhams.

"In our view, this will all depend on the amount of stock left in the business, which is declining at pace, and the forward orders for spring/summer 2021 product, remembering that some of the spring/summer 2020 product will have been hibernated due to lockdown 1.0," they said in a note to clients.

"Any deal with Frasers Group would probably see a portfolio of Debenhams operated under a 12 month licence. We also wonder how many Debenhams stores that will survive long term, alongside Fraser Group's House of Fraser fascia. Many of the stores sit adjacent to each other."

The Shore analysts said they believed Ashley may only want 30-40 stores "subject to tough rent negotiations" and noted that the tycoon "is known to be a hard negotiator and will probably walk away rather than over pay".