RE: Question from an idiot28 Mar 2019 13:32
Daniel this article published on the FT backs your theory, MA is acting as if he has all the time in the world for his bid to go through
If the phrase “possible firm offer” is an oxymoron, what does that make the offerer? Especially an offerer who is still “considering” the firmness of the possibility less than 48 hours before a rival deal is voted on? This is a question that the board and shareholders of Debenhams must now ask, after Mike Ashley’s Sports Direct waited until 11pm on Tuesday to indicate a price for buying the 70 per cent of the group’s equity it does not already own.
Having spent months trying to gain control of the department store chain without paying its shareholders anything — by offering loans or conditional asset purchases — Sports Direct suddenly decided they deserved more than being “ignored, cast aside and trampled underfoot” in Debenhams’ own refinancing plan. If Mr Ashley reckoned this late attempt to save face, and his own shareholding, looked convincing, he must think we are morons. As well.
As analysts at GlobalData, noted: “His talk of a £61m offer, without actually making one, is hard to take too seriously.” Not least because it fails to address the two issues that Debenhams must confront within days: a plan for £560m of debt, which would all fall due on a takeover; and a way to meet about £200m of immediate funding requirements. Mr Ashley’s “possible firm offer” includes only an impossibly unfirm commitment to “assist Debenhams” with immediate funding. And that assistance would only come if the cash-strapped retailer scrapped its own well-advanced refinancing plans.
To be fair to Mr Ashley, he actually has three intelligent reasons for making an offer for Debenhams equity. First, it would prevent Sports Direct’s 30 per cent stake — and everyone else’s — being wiped out in a likely debt-for-equity swap that hands control to lenders. That matters to his own shareholders, too. Second, he could realise value — analysts at Jefferies note that using his £61m equity valuation, 2018’s net debt of £321m, and calendar 2019 earnings of £100m, the enterprise value is only 3.8 times earnings. In reality, given the now far higher debt and lower earnings, it is more expensive than that, but Sports Direct does have the ability to cover liabilities and seek better refinancing. Third, he could realise his vision of turning both Debenhams and House of Fraser into “Harrods of the High Street”. Just the leverage with landlords and suppliers he would gain would be worth it.
So why not detail one — or all — of these plans in the “possible firm offer”?
Possibly because the real stupidity is leaving it all far too late. If Mr Ashley had offered a price and a plan months ago, instead of trying to avoid paying shareholders, there would have been more time for the board and investors to consider it.
Now, there are just hours until a vote on bond refinancing is set to hand creditors more control of Debenhams’ assets. Mr
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