Sports Direct’s owner Mike Ashley has written a bluntly worded letter to the boss of Debenhams discussing his offer of a £40m investment in the struggling department store chain.
The letter, addressed to Sergio Bucher, suggests without the money the company “has zero chance of survival”.
Mr Ashley writes he is frustrated Debenhams doesn’t want his “help”.
In the letter, published by the Daily Telegraph, he adds he wasn’t surprised “by the predictable negative response”.
Sports Direct already owns 30% of Debenhams, which is closing up to 50 of its stores and seeking new finance following a downturn in its business.
Debenhams issued a statement saying it welcomed Sports Direct’s proposal “as a clear demonstration of their willingness to support the company”.
“However, as the offer came with conditions that could affect the interests of other stakeholders, while the board does not think it could accept the proposal, as presented, it has invited Sports Direct to engage as part of our broader refinancing process.”
Mr Ashley, who is the majority owner of Sports Direct, said he was concerned that Debenhams didn’t appreciate the position it was in and urged Mr Bucher to accept his offer.
He wrote “the market” was saying that Debenhams had no credit insurance and that banks were advising clients to be wary about being in credit to Debenhams.
In the context of a very difficult climate for retailers Mr Ashley added he couldn’t see how the proposal to inject money into the department store chain could be “seen or portrayed as a negative”.
“If I’m sounding extremely frustrated – well I am. We’ve seen this before, with Blacks and HoF [House of Fraser]. They didn’t want any help either.
“We don’t want to see Debenhams fail. It’s not in our interest to see it fail, but without something changing rapidly all of the shareholders risk getting wiped out.”
However, some observers have suggested that Mr Ashley may have motives other than reinvigorating Debenhams’ fortunes.
They argue the offer of a cash injection may be designed to place Sports Direct in a better position to accrue assets, should Debenhams go into administration next year.
Shares in Sports Direct dropped sharply on Thursday, by more than 10%, after the firm held a conference call with analysts to discuss the firm’s half-yearly results.
The purchase of House of Fraser had led to a 27% fall in profits, but investors also focused on a response that Mr Ashley gave to a question about current trading in his core sports retail business.
His response that November’s trading was “unbelievably bad” was taken as an indication that Sports Direct was feeling the squeeze affecting many High Street retailers.
However, Sports Direct later issued a clarification stating that Mr Ashley was not issuing a further profit warning. The firm said that while the House of Fraser acquisition would result in a drop in earnings for the full year, as indicated in the half-yearly report, otherwise their forecast for full year profits to grow 5-15% had not changed.