High street retailer Blacks Leisure isn’t exactly rolling out the red carpet for Mike Ashley, its largest shareholder, who’s just launched a bid to buy the company. Ashley’s Sports Direct has offered 62p a share to buy Blacks, equivalent to about £26m – but shareholders apparently won’t get out of bed for less than 100p, i.e. £43m. Blacks rather snottily dismissed the offer as ‘wholly inadequate’ today, and argued that investors would be much better off if its proposed fundraising (previously blocked by – you guessed it – Sports Direct) was allowed to go through. It’s almost like they think Ashley is trying to pick them up on the cheap...
Sports Direct has been circling Blacks (owner of both Blacks and Millets) for a few years now, and with a stake of just under 30% (having resolved its row with the administrators of Kaupthing), it’s the company’s biggest individual shareholder. But Ashley's not in any mood to line his fellow investors’ pockets: this 62p-a-share offer is a measly 3% higher than the pre-bid closing price. Sports Direct points out that it’s still higher than the share price has been all year – but investors would be excused for considering this to be a pretty miserly premium. The Blacks board clearly thinks so too, judging by its rapid rebuttal.
The other big bone of contention between the two is that Sports Direct was responsible for blocking a £20m fundraising last month, which was intended to finance the last phase of Blacks' turnaround plan. This, the latter says, ‘would have led to a substantial increase in shareholder value’ – since CEO Neil Gillis would have been able to refinance his expensive overdraft and spend some dosh re-fitting some of his more dilapidated stores. Instead, it argued today, with this offer ‘Sports Direct is attempting to transfer that potential shareholder value from shareholders to Sports Direct.’
The good news for Blacks is that it does have a plan B: a different type of fundraising called the ‘gazette route’. This only requires the backing of 50% of shareholders, so it doesn’t matter if Sports Direct refuses to play ball. Since other investors seem willing to participate (perhaps on the basis that Blacks’ share price is now so low that the only way is up), that means Ashley isn’t in the strongest negotiating position. So if he wants to get his hands on Blacks, he’s going to have to dig a lot deeper than this. (Although Blacks is unlikely to mind if he doesn't.)
In today's bulletin:
Shock horror: Lloyds might actually make a profit this year
Mike Ashley gets short shrift from Blacks Leisure
Dragons Bannatyne and Caan get fiery over non-dom row
Use Budget to slash tax, says small business group
MT talks to Brora's Victoria Stapleton