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Does Sports Direct's Mike Ashley only buy crap companies?

Following the rescue of House of Fraser from administration last summer, as well a proposed (and then swiftly withdrawn) offer for Patisserie Valerie in February, you could be forgiven for thinking that all Mike Ashley does is buy up firms that have already gone to pot
Sports Direct
Ashley's Sports Direct empire has snapped up a number of troubled retailers in recent months

With Sports Direct International PLC (LON:SPD) considering a cash offer for Debenhams PLC (LON:DEB), the department store chain could be the next addition to the list of struggling companies snapped up by SPD’s infamous chief executive Mike Ashley.

READ: Mike Ashley sets out terms and conditions of possible £61mln cash offer for Debenhams

Following the rescue of House of Fraser (HoF) from administration last summer, as well a proposed (and then swiftly withdrawn) offer for Patisserie Holdings PLC's (LON:CAKE) Patisserie Valerie in February, you could be forgiven for thinking that all Mike Ashley does is buy up firms that have already gone to pot.

But is that the case across all his acquisitions?

House of Fraser

Perhaps the most high-profile rescue undertaken by Ashley, the department store was bought out of administration by Sports Direct for £90mln back in August.

Before Ashley showed up, the chain had been through the largest failure of a high street brand in UK history after a £70mln rescue deal from Hamley’s owner C.banner International fell through, leaving HoF short of the £40mln it needed to stay afloat.

READ: Harrods of the High Street: Ashley's ambition as Sports Direct grabs House of Fraser for £90mln

Since taking over the company, Ashley has managed to keep 55 out of the 59 stores open, an impressive feat, given a credit voluntary arrangement (CVA) approved by HoF’s former owners in June had included plans to shutter 31 stores, risking the jobs of nearly two-thirds of its 17,000 staff.

Verdict: Can’t get more crap than the biggest high street failure in history

Evans Cycles

The bicycle retailer was snapped up by Ashley for £8mln in October in a pre-pack administration deal (i.e. when an insolvent business is put up for sale before administrators are appointed).

The price tag was particularly bruising for Evans’ owners, private equity firm ECI Partners, who had bought the chain for around £75mln back in 2015.

READ: Sports Direct expects at least 50% of existing Evans Cycles stores to remain open following purchase

After taking over, Ashley was not quite as kind to Evans as HoF, announcing that half of the company’s 60 branches would face closure, putting around 500 jobs at risk.

Verdict: Pretty crap for the employees of those 30 branches

Agent Provocateur

While lingerie may not immediately come to mind when thinking about Sports Direct, purveyor of lacy nightwear Agent Provocateur was bought by Ashley in March 2017 for £25mln through his investment vehicle Four Holdings.

Originally founded in 1994 by Joe Corre, the son of renowned fashion designer Vivienne Westwood, the company floundered into administration after, according to Corre, being run into the ground by its previous owners 3i Group PLC (LON:III), who bought a controlling stake in the brand for £60mln in 2007.

READ: Agent Provocateur founder gives 3i and Mike Ashley a dressing down

“At every stage 3i has excelled in its incompetence and neglected its duty to shareholders,” Corre said at the time.

He wasn’t particularly pleased with the new owner either, branding Ashley “a disgrace to British business”.

Verdict: Company is still trading, but pretty crap if you believe Joe Corre

USC

Ashley bought an 80% stake in sports clothing brand USC in 2011, before taking complete control in early 2012.

However, in something of a twist on the established formula, Ashley placed USC into administration at the start of 2015, dishing out redundancy notices to dozens of warehouse staff and shifting leases for USC stores and its trademark over to other companies under the Sports Direct umbrella.

The week after, another Sports Direct holding company, Republic Retail Limited, bought USC out of administration in a pre-packaged deal, wiping out around half of its debts.

Aside from what seemed like blatant asset stripping ahead of USC’s collapse, additional controversy arose when Sports Direct’s then chief executive David Forsey was charged with violating employment laws regarding 30 days’ notice of redundancy, having provided USC’s warehouse workers with just 15 minutes notice of their termination.

Verdict: Arguably self-induced crap as well as some pretty crappy employment practices

JJB Sports

Despite having worked through a major, recession-induced restructuring in 2011 and rumours of a potential hostile takeover from JD Sports Fashion PLC (LON:JD.), JJB Sports had effectively collapsed into administration in September 2012, with Sports Direct grabbing the brand, its website, and 20 of its 180 stores less than a month later.

The following year, JJB’s former executive chairman, Sir David Jones, was charged with forgery and making misleading statements to the market concerning a £150mln loan to the business.

The buyout marked a fitting revenge for Ashley on JJB’s founder and former Wigan Athletic chairman Dave Whelan, who had initially locked him out of the “sportswear mafia” which in the late 1990s and early 2000s, had included JJB and Stockport-based Allsports, both of which have now been crushed under the boot of Sports Direct.

Verdict: Revenge is a dish best served crap

And the rest …

Aside from the above ‘Top 5’, Ashley’s buying spree has also extended to Piccadilly Circus sportswear store Lillywhites, which he bought out of financial difficulty in 2002.

Sports Direct also snapped up brands Dunlop, Slazenger, and Carlton in 2004 from distressed sellers, netting a tidy £10mln from selling the intellectual property rights of Slazenger Golf to JJB in 2005.

Finally, there is Ashley’s other high-profile purchase, football club Newcastle United (although whether this is covered by the definition of ‘crap’ may be a matter of opinion).

Ashley has owned the club since July 2007, and since then, it has been relegated from the Premier League twice and seen his initial popularity with fans turn sour after a series of missteps, including the controversial sacking of manager Chris Hughton in 2009.

He was also criticised for not doing adequate due diligence on Newcastle’s debts before purchasing the club.

Who could be next?

While Ashley’s efforts to install himself as the head of Debenhams has been grabbing most of the headlines in recent weeks, he is still sniffing around for other potential acquisitions.

On Wednesday, the board of home shopping company Findel PLC (LON:FDL) urged its shareholders to reject a £140mln offer from Sports Direct, saying the 161p per share cash offer was “opportunistic” and “significantly undervalues Findel and its future prospects”.

READ: Findel urges shareholders to reject takeover bid from Mike Ashley's Sports Direct

However, in a departure from Ashley’s modus operandi, Findel seems to be trading well, with a trading update for the last 15 weeks of 2018 showing revenue growth of over 10%.

Assuming the figures hold up, it could be that Ashley’s stint as ‘crap company rescuer’ may finally be taking a turn.

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