Sports Direct Upgrades Stake in Debenhams

  By Tapan Panchal 
 

LONDON--Sports Direct International PLC (SPD.LN) has raised its stake in Debenhams PLC (DEB.LN) in a bid to strengthen its relationship with the departmental store, after its last week's wager on Tesco PLC (TSCO.LN).

The sports equipment and clothing retailer said late Thursday it now has a 11.22% interest in Debenhams, after it acquired a fresh stake worth 33 million pounds ($53.37 million). It acquired 4.60% stake comprising of 56.4 million Debenhams shares.

"As previously announced, Sports Direct is already working together with Debenhams and looks forward to building this relationship," Sports Direct said in a statement.

Earlier in January, it took out an option to buy up to 6.6% of Debenhams and said that it wanted to explore options to work together. At that time, Debenhams's shares were trading around at 82 pence each.

The new stake buy led to a rise in Debenhams's share price, which opened 3% higher on Friday and was trading at 62 pence at 0839 GMT. Year-to-date Debenhams's shares have declined by around 41% amid lower-than-expected sales and falling margins.

Debenhams in June agreed to trial Sports Direct concessions in its own stores in an effort to boost flagging sales.

Analysts at Citigroup said the new stake acquisition could be due to encouraging results from the concessions in Debenhams stores. They have retained a buy recommendation and GBP10 target price on Sports Direct.

The Shirebrook, England, -based company has also taken out a similar kind of option in Tesco, betting on the grocer's recovery after the recent sales decline.

The company, whose largest shareholder is billionaire founder Mike Ashley, has inked a option contract with Goldman Sachs to buy 23 million shares, or 0.28% stake, in Tesco. It currently leases excess space in some of Tesco's European stores, and is in discussions for a similar arrangement in U.K. stores.

Sports Direct, which owns Dunlop, Slazenger, Everlast, Lonsdale and Karrimor sports brands, operates around 400 stores in U.K. At 0839 GMT, the company's shares were trading nearly 1.7% higher at 605 pence each.

Rory Gallivan and Ed Ballard contributed to this article.

Write to Tapan Panchal at [e-mail]

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