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Mike Ashley's pursuit of Debenhams is understandable


“Let it go, Mike,” never works with the founder of Sports Direct. Mike Ashley, to his continuing fury, lost £150m of his and his shareholders’ money in his first attempt to get control of Debenhams. He was bound to show up at the administrator’s door at the 11th hour to take another look. And, strange as it may sound, you see why he’s still tempted if a slimmed-down deal can be found.

First, JD Sports clearly thought there was something worth salvaging from the financial wreckage. Peter Cowgill, the sportswear retailer’s executive chairman, is no mug. Nor is Pentland Group, the group’s 55% shareholder, which presumably backed the Debenhams idea in principle. In the event, JD dropped out when other shareholders threw a fit, but a well-regarded FTSE 100 rival’s interest was intriguing.

Second, the department store chain is now a slightly different beast from the one Ashley foolishly pursued by buying shares that became worthless. Most of the onerous leases have been converted to turnover-based rental arrangements, which changes the profile of fixed costs. It’s still impossible from the outside to tell whether the new lease terms are attractive to a new owner (the actual percentage of turnover matters), but asking the question costs nothing.

One must assume that Ashley would not be remotely interested in owning all 124 Debs stores permanently. As with his purchase of House of Fraser, he’d see what further discounts can be wrung from landlords and then pick and choose sites. But, even in today’s high street climate, there must be 40 or so Debs stores in decent locations, whether to trade in their current format or to convert.

Ashley and Frasers’ warnings about “no certainty” and that “time is short” should be taken seriously. It feels as if any deal with the administrator would be done in days, or not at all. But, from the point of view of saving a few thousand jobs, any interest is better than none.

Kingfisher has done the right thing

Well done to Kingfisher, the latest retailer to say it will return its business rates freebie from the Treasury – a sum of £130m.

The group gets a little extra credit on account of having closed its B&Q and Screwfix stores for a few weeks in the early stage of the first national lockdown. But since a DIY mini-boom quickly followed, repayment is clearly the right way to behave. Kingfisher’s shares, after an exciting ride, are up by about a quarter since the start of the year.

So what news from Travis Perkins, owner of Wickes and Toolstation? Those two brands also enjoyed the DIY fun: quarterly like-for-like sales were up 18% and 25% respectively in October’s update.

For now, Travis Perkins is using the M&S/John Lewis defence, as we might call it, and pointing to troubles in other parts of its business – specifically its larger builders’ merchant division, where the benefits of recoveries in housebuilding and construction markets have yet to be felt.

“This crisis is far from over, so we will continue to monitor the situation,” says Travis Perkins. For the time being, that position is defensible, but the business rates question about Wickes and Toolstation won’t go away. Don’t monitor indefinitely.

Countrywide’s story isn’t over yet

There’s a bid, or a semi-bid, every fortnight round at Countrywide, or so it feels.

The action at the UK’s biggest chain of estate agents kicked off when Alchemy Partners, a private equity firm, pitched up with a £90m capital injection at 135p a share. That looked far too low, even for a business in Countrywide’s over-indebted form. Connells, owned by Skipton Building Society, quickly demonstrated as much with a clean cash offer at 250p.

Alchemy then came back with a rejigged version that allowed shareholders to escape at 250p if they wished, or hang around for a recapitalised attempt at recovery. Now Connells is back with an offer of 325p.

The law of small numbers applies here, it should be said. Connells’ new bid values Countrywide at only £112m, versus the target’s former heights of £1bn five years ago, before overambitious expansion came back to bite. Even so, progress from 135p to 325p in the course of a bid battle is going some – and we don’t know if Alchemy is finished yet.

To think: Countrywide’s board unanimously recommended the first offer in October. Did nobody tell Peter Long, the executive chairman who had to make his excuses and leave when the action picked up, that he might aim a little higher?

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