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Sports Direct International Plc

Mike Ashley: The failed squash player who became a ‘power drinking’ retail billionaire

Ashley built his fortune on shrewd acquisitions of well-known brands and businesses from distressed sellers and his strategy is almost the same today, albeit slightly more ambitious

mike ashley
Ashley, who is estimated to be worth £2.5bn, doesn’t look like much of an athlete these days

Mike Ashley is one of the most eccentric billionaires in the UK, if not the world.

He is known just as much for his “unconventional” business style and penchant for a pint (or ten) as he is for the multi-billion retail empire he has built up over the past three decades.  

The 54-year-old owner of Newcastle United owner founded what would later become Sports Direct International PLC (LON:SPD) in 1982 after an injury cut short his dreams of becoming a professional squash player.

Rapid growth in the 80s and 90s

Using a £10,000 loan (about £36,000 in today’s money) from his family, he set up his first sports and ski shop in Maidenhead.

Backed by private equity capital, rapid expansion followed, and by the end of the 1990s, Sports Soccer as it was then known, had grown to almost 100 outlets across the country.

Nowadays, Sports Direct – the result of another rebranding – operates over 750 stores in the UK and Europe and turned over £3.4bn last year.

Buying on the cheap

As well as growing the store's estate over the past 36 years, Ashley has also taken advantage of distressed assets to expand his company.

He picked up Slazenger Dunlop on the cheap – for an estimated £40mln – back in 2004 after Royal Bank of Scotland seized control of the struggling sportswear maker. Sports Direct would go on to sell the Dunlop part of the business 12 years later for £112mln – a nice return on investment.

Lillywhites, the venerable sports department store which occupies a prominent spot in London’s Piccadilly Circus, was another example of Ashley’s opportunism. He snapped it up back in 2002 after it too fell into financial difficulty.

Lonsdale, Everlast, Donnay, Kangol and Firetrap are other brands to have been bought up by Ashley and his team, with most of them being taken off the hands of distressed sellers.

More upmarket these days

To this day, his strategy hasn’t wavered, although he has arguably become more ambitious.

Over the past couple of years, Ashley has stepped up his rhetoric about moving Sports Direct away from its ‘stack ‘em high, sell ‘em cheap’ philosophy and turning it into the “Selfridges of sport” instead.

A costly renovation – or 'elevation', as the firm calls it – of the retailer’s store estate is underway as he looks to achieve just that.

His acquisitions attempted and completed, reflect this slightly more upmarket approach, too. He is still looking for distressed assets, just ones with higher profiles.

House of Fraser, the struggling department store chain which he bought for £90mln earlier this summer, is a prime example.

READ: Ashley's end-game uncertain after £90mln HoF acquisition

Stripped of its £400mln-worth of debts, Ashley pounced at the chance to bag the company which he wants to turn into the “Harrods of the high street”.

Debenhams PLC (LON:DEB) could be next on the hit list, although Sports Direct has so far denied any interest in taking it over.

Ashley already owns a 30% stake in the group and with Debs bringing in advisers to help figure out how to dig itself out of a hole, many in the City thought the billionaire might look to add to his portfolio.

The feeling among some is that he may wait, like he did with HoF, to get Debenhams on the cheap, although others have poured cold water on that idea, pointing to the fact he already owns a big part of the business.

In other words, it would be self-defeating to willfully allow Debs to fall into administration. One analyst called the idea "far-fetched". 

Whatever happens, for a kid who grew up in a modest bungalow and left school without any A-Levels, Mike Ashley’s ascent up the UK’s rich list – his net worth is estimated at £2.5bn – is nothing short of meteoric.

‘I like to get drunk’

It hasn’t been without controversy though. His personal life, unique management methods and corporate governance have all attracted widespread attention.

Never one to back down from a fight, Ashley sparked an Office of Fair Trading probe in 2000 after telling the regulator that some of his competitors, including JJB, had been fixing the price of football shirts. That led to JJB and a group of others being hit with a £18.6mln fine.

He is also seemingly one to never back down from a pint. Last year, Ashley was taken to court by a former banker who claimed Ashley reneged on a £15mln deal made in the pub.

Ashley won the court case – he said it was just “banter” – but the stories which came out were arguably more damaging than the possible financial penalty.

During the trial, Ashley described himself as a “power drinker … [who drinks] to get drunk”.

That was after the court heard of Ashley’s “unconventional” business practices, which included holding senior management meeting during “lock-ins” at a pub near Sports Direct’s head office.

On one occasion, he was reportedly so drunk on one evening out with an analyst that he vomited into a fireplace in the middle of the pub. During other meetings, he allegedly fell asleep under the table to show his boredom with City figures.

Shareholder fallouts

He has often clashed with shareholders, who voted against plans to pay Ashley’s brother the best part of £11mln last year, while earlier this summer, it was revealed that his soon-to-be son-in-law, who works as Sports Direct’s head of elevation, was due to receive a £5mln bonus.

Investor groups said throwing that sum of money at anyone, but to do so at a family member was “appalling”. Sports Direct hit back saying the amount had been determined by an independent panel.

Only last week, he turned on shareholders, telling them they had “stabbed [the company] in the back” after his friend and the company’s chairman resigned following pressure from investors.

It's not the kind of press release that is often fired out by your average CEO, but that's Mike Ashley for you.

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