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Sports Direct faces probe from regulators over Debenhams bid

The FCA has voiced concerns around the Mike Ashley-owned retail giant's disclosure of information regarding a possible bid for the department store chain prior to its collapse
Mike Ashley
Sports Direct's owner, Mike Ashley, made several attempts to install himself as Debenhams CEO

Sports Direct International PLC (LON:SPD) is reportedly under the regulatory microscope following concerns around its bid for collapsed department store chain Debenhams.

According to The Times, the Financial Conduct Authority (FCA) has raised questions regarding the disclosure of SPD’s potential bid for Debenhams prior to its administration in early April.

READ: Mike Ashley's Sports Direct rules out takeover bid after Debenhams enters administration

The regulator had initially queried the issue ahead of the FTSE 250 retailer’s AGM in September, after which Sports Direct was forced to issue a statement clarifying that it did not intend to make a bid for the department store.

The increased scrutiny also follows a very public dispute between the two companies as Sports Direct’s owner, Mike Ashley, made several attempts to install himself as Debenham’s chief executive to protect his 29% stake in the firm, all of which was wiped out in the administration.

Auditor under pressure

Meanwhile, the Financial Reporting Council (FRC) has also voiced concerns around how SPD’s auditor, Grant Thornton, valued the group’s stake in Debenhams in its most recent set of financial results.

The FRC is questioning whether Sports Direct’s stake in Debenhams should have been classed as giving it significant influence over the business, meaning it should have been valued higher in its accounts.

The inquiry is the second from the watchdog into Grant Thornton’s audit of Sports Direct, having previously said it was looking into the company’s 2016 results after questions were raised over the alleged non-disclosure of payments to a firm owned by Mike Ashley’s brother.

Grant Thornton is also facing regulatory scrutiny over its role as auditor of café chain Patisserie Valerie, which collapsed at the end of last year after unearthing a massive black hole in its accounts, and outsourcer Interserve, which went bust in March.

In early trading on Friday, Sports Direct shares were 0.5% higher at 298.6p.

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