Sports Direct International Plc, the U.K.’s largest sports retailer, bought a 4.6 percent stake in Debenhams Plc and said it wants to work with the department-store chain to create value for shareholders.
Debenhams rose as much as 6.6 percent in London trading after Sports Direct disclosed the purchase and said it “wishes to explore options at an operational level.”
Sports Direct, controlled by billionaire Mike Ashley, may seek to put sportswear concessions inside Debenhams stores, according to Chris Chaviaras, an analyst at Barclays in London. The stake purchase comes two weeks after the department-store chain warned of a profit slide after a weak Christmas period.
“Sportswear is quite a hot industry right now,” Chaviaras said by phone. An association between Sports Direct and Debenhams “could be positive for both of them.”
Debenhams rose 5.6 percent to 86.10 pence at 8:36 a.m. in London trading, taking them above the level they were trading at prior to Dec. 31, when the company said that profit will drop in the first half of its financial year. Sports Direct rose 0.2 percent to 757.5 pence.
The stake purchase was made “without the prior knowledge of the Debenhams board of directors, but Sports Direct has communicated to Debenhams’ board its desire to work together and its intention to be a supportive shareholder,” Sports Direct said in a statement today, without being more specific.
Debenhams said separately it is “open-minded” with regard to looking at ways of improving its performance.
Sports Direct shares have risen more than sevenfold in the four years through the end of 2013, boosting the company’s market value to about 4.5 billion pounds. Sports Direct, based in Mansfield, England, has annual revenue of more than 2 billion pounds ($3.3 billion). Debenhams shares are little changed in the same period, valuing the retailer at about 1 billion pounds.