Sports Direct increases exposure to Debenhams with share swap

Mike Ashley's sports chain Sports Direct has disposed of a 4.6% shareholding for a 'put option' over a 6.1% stake

Debenhams
Debenhams

Sports Direct could increase its stake in high street fashion retailers Debenhams after swapping its 4.6% shareholding for a ‘put option’ over 6.1% of the firm’s share capital.

The complex move means the sports chain’s overall exposure in Debenhams has moved up to 12.7%.

Under the put option agreement Sports Direct has the right to buy over 74.1 million shares in Debenhams, at an agreed price, in the future.

A note to Sports Direct shareholders from the firm said the put option, which is effectively a gamble on Debenhams shares rising in value, will cost it a maximum of £46m.

Under the terms of the put option, if Debenhams shares fall below an agreed strike price Sports Direct have the option to acquiring ordinary shares in Debenhams at the exercise price or pay the cash settlement value of the put option.

The notice to shareholders stated: “As previously announced, Sports Direct continues to work together with Debenhams and looks forward to building a long-term relationship.”

This latest move is similar to one Sports Direct made in January 2014, in which it swapped a 4.6% stake for a put option over a 6.6% stake.

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