RE: From DM and Investors Chronicle26 Jan 2019 14:12
From Investors Chronicle
Caught napping
AGMs normally include the routine re-election of directors. Debenhams’ (on 13 January) took everyone by surprise. Ms Osborne was duly ratified as a director with 89 per cent of the votes cast. The next resolution was for Sir Ian Cheshire, who had been chairman since April 2016. The shock was that 57 per cent voted against. He resigned after the meeting. Next up was Sergio Bucher, the chief executive brought in to beef up Debenhams’ internet offering – 56 per cent voted against him. He continues in his role for now, but is no longer on the board, which now consists of Ms Osborne and five non-executives. Presumably, he now attends meetings by invitation only.
How this happened is salutary. Debenhams has 1,228m shares in issue. According to the last annual report, Sports Direct (SPD) owns 365m of these. That’s just under the 30 per cent threshold. Above that and it would have to bid for the company. So the Sports Direct block alone would have beaten the 357m votes cast in favour of re-electing Sir Ian. It was reported that Mike Ashley, who owns just over 60 per cent of Sports Direct, had teamed up with another substantial shareholder (Mickey Jagliani, who heads the Landmark Group, a Dubai-based retail conglomerate) to unseat both directors.
Why did he do this? In mid-December, Mr Ashley is said to have offered to lend Debenhams £40m interest-free, in return for an additional 10 per cent stake plus a waiver from having to bid for the whole company. This would have diluted the stakes of other shareholders. Sir Ian and Mr Bucher rebuffed him. Just as well, for that 40 per cent holding would have given Mr Ashley and Mr Jagliani between them almost majority control.
The speculation is that Mr Ashley will now angle for Debenhams to go into administration, so wiping out its shareholders altogether. Bondholders, whose claim on a company’s assets takes priority over shareholders, might also resist. He would then be able to bid for the best parts on the cheap. Buy those and he could reset the terms of the property leases and the supply agreements, just as he has done recently with House of Fraser and Evans Cycles.
What must be galling is that the two ex-directors were voted out by just over 100m votes, yet holders of a third of Debenhams’ shares (that’s 405m) failed to vote. Positive abstentions, or apathy? A small investor with Debenhams in their individual savings account (Isa), self-invested personal pension (Sipp) or other nominee account, might wish to ask their platform provider whether they voted, and if so how. As with the critical Unilever vote last year, this emphasises again the need for providers to seek instructions in advance from the beneficial owners of the shares entrusted to them.
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