JD Sports now in exclusive talks on Debenhams deal
The Times reported late on Monday that talks with the Debenhams administrators at FRP and its advisors Lazard began earlier in the day.
The department stores chain currently operates 124 locations, although most of these have been closed since early November due to the English lockdown. It employs around 12,000 people at present and went into administration in April, its second administration filing in as little as two years.
If a deal happens, it will be a relief for Debenhams’ staff and would also be a surprise to some people who had assumed that liquidation was beckoning for the UK's oldest department stores chain.
That said, it's not yet a done deal and there are still stumbling blocks, including issues around store leases with the company having been talking to landlords for much of this year about renegotiating rent deals.
And even if the company is acquired by JD Sports, it still seems likely that Debenhams could close more of its stores, with some suggestions talking of a restructuring plan shrinking it down to 60 locations.
Yet Debenhams does have some key selling points. It remains a popular destination with a powerful beauty business and an e-commerce site that’s reportedly the big attraction for JD. The Times also suggested that the prospect of being able to obtain lots of high street space via a Debenhams buy is appealing to to its potential new owner.
But neither of the parties have commented, so it's all speculation at present.
If it does happen, former Debenhams shareholder Mike Ashley is likely to be unhappy. The Frasers Group business that he controls built up almost-30% stake in Debenhams before its first administration filing, with that stake wiped out when the company failed and was taken over by its lenders.
He had attempted to take control at the time and had also been interested in buying Debenhams in the latest auction. But he accused its advisors of freezing him out, although they said that he wasn't offering a high enough price for the business.
An acquisition of that business by JD Sports would create even more intense rivalry between Frasers and JD. Frasers owns Sports Direct and House of Fraser. The two have been bitter rivals for many years and with both potentially owning a giant UK sports chain as well as a major department store chain each, it would certainly be an interesting situation.
Like Frasers, JD sports has a reputation for buying struggling brands, such as Footasylum and Pretty Green. And while many of them tend to be much smaller than the Debenhams department stores business, JD’s recent acquisition of American chain Finish Line for $558 million shows how it's prepared to stump up big money in areas that it really believes have potential.
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