But before he makes any formal offer, the billionaire said Debenhams would have to appoint him as its new chief executive and cancel its controversial plans to secure a £200mln lifeline from its lenders.
If Debenhams' board agrees to the conditions, Sports Direct said it would formally offer 5p for each Debenhams share.
That price would be more than double what the stock closed at on Tuesday and would offer “full and fair value”, said Sports Direct.
“[Sports Direct] does not believe that Debenhams has the same value if it is (in effect) handed over to Debenhams' existing lender group.
“As such, Sports Direct would expect the possible offer to be attractive to Debenhams shareholders and other stakeholders as an alternative to Debenhams' current restructuring and refinancing process.”
Not his first grab for power
The 54-year-old announced earlier this week that he is mulling a takeover bid, in response to which Debenhams asked him to provide more details.
Ashley, who stands to lose millions of pounds should his Debenhams stake be diluted out of sight, has tried several ways to wrestle control of the retailer in the recent past.
Last week, he made a £100mln bid for the company’s Danish business, Magasin du Nord, but Debenhams bosses rejected the offer, a condition of which was that Ashley was put in charge of the group.
He has also recently called for a shareholder meeting at which he would ask investors to back his proposal to sack the entire Debenhams board – apart from chief financial officer Rachel Osborne – and appoint him to an executive role.
Ashley was instrumental in getting chairman Ian Cheshire and chief executive Sergio Bucher kicked off the board back in January.
Shortly before then, it had emerged that Debenhams, which has been one of the worst hit by the UK high street malaise, had turned down a £40mln loan offer from the Newcastle United owner.
"Put pride and ego aside"
Russ Mould, investment director at AJ Bell commented: “Debenhams’ board is faced with a sticky situation. They clearly dislike Mike Ashley and his team yet any takeover proposal must be considered with shareholders’ interests at heart.
“The business is in a very difficult position both financially and operationally and here we have a party which believes it has a solution to both issues.
“Debenhams has sunk so far down into its hole that time is running out before it disappears altogether.”
He added: “So far Debenhams has said that Sports Direct’s plan isn’t enough to address its immediate funding requirement so it looks like it will pursue a restructuring plan that will provide financial relief but wipe out shareholders.
“But shareholders may consider that Sports Direct’s proposal could provide a huge difference as their investment would still be worth something.
“Debenhams really needs to put pride and ego to one side and have a proper conversation with Sports Direct about whether its proposal has merit or whether it can provide another solution.”
Debenhams shares jumped 54% higher to 3.39p after the indicative bid move but still remain well below the cash offer Ashley has indicated.
-- Adds analyst comment, share price --