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Homeeurope newsSports Direct buys 4.6% stake in Debenhams

Sports Direct buys 4.6% stake in Debenhams

Sports Direct, Britain's largest sporting goods retailer, has acquired a 4.6 percent stake in Debenhams and said it wants to explore options "at an operational level" to work with the country's No. 2 department stores group.

Shares in Debenhams rose up to 6.5 percent on Monday after Sports Direct said it had purchased 56.8 million Debenhams shares, worth 46 million pounds ($75.8 million) at Friday's closing price of 81.6 pence.

"This acquisition of shares has taken place without the prior knowledge ofthe Debenhams board of directors, but Sports Direct has communicated to Debenhams' board its desire to work together and its intention to be a supportive shareholder," Sports Direct said on Monday.

Analysts speculated that Sports Direct, controlled by billionaire Newcastle United soccer club owner Mike Ashley, was keen to establish concessions for some of its fashion brands, such as Firetrap and Kangol, in some of Debenhams' 156 U.K. stores and would use the stake as leverage in negotiations.

"You can see why they might want to have them in stores other than their own," said one analyst who did not want to be named. "When you have fashion brands that are wholesaled elsewhere it always tends to enhance the credibility of the fashion brand (having them in stores)."

Debenhams, which issued a profit warning last month after enduring poor Christmas trading and parted company with its finance director, noted Sports Direct's stock purchase and said it was "open minded" about working with the firm to improve its performance.

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Prior to Monday's development, shares in Debenhams had lost 22.4 percent of their value over the last three months and 7.1 percent over the last month.

Analysts noted Sports Direct had looked closely at acquiring department stores group House of Fraser over the last year and had in the past been active in buying stakes in other retail companies, including JD Sports, JJB Sports and Blacks Leisure, with mixed success.

"In our view one should not read too much into this new investment," said Cantor Fitzgerald analyst Freddie George.

"This acquisition provides a further distraction alongside all other recent investments and broadly increases Sports Direct's net debt to circa 160 million pounds," George said.

Shares in Debenhams were up 4.5 pence at 85.9 pence in early morning trade, while shares in Sports Direct were up 1.5 pence at 757.5p.

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