Shareholders urged to oppose Ashley deal
Watchdog PIRC is calling for Sports Direct shareholders to oppose proposals to purchase 32 properties from Mike Ashley. Shareholders will vote on the decision to acquire the £86.8m sites from Ashley, who holds a 72 per cent stake in the Mansfield-based retailer, tomorrow.
Independent directors at Sports Direct employed property company CB Richard Ellis to value the sites, which are already occupied by Sports Direct. The valuation, made on a vacant possession basis, stood at £54.35m.
The 32 properties are all sites which sportsdirect.com, the company's online subsidiary, use as trading bases across the UK. The freehold or long leasehold interest is held by Ashley in each instance.
Shareholder group PIRC said it had "some reservations" about the deal, which would allow the properties to be sold for the same amount that Ashley paid for them.
The watchdog said the £32.45m premium between the requested amount and the valuation figure was "not sufficiently transparent".
However, the independent directors considered that, if the 32 sites were valued on the basis that they were occupied and leased for ten to 15 years at typical market rents, they would be valued at £75-£80m.
A statement from Sports Direct said the directors, other than Ashley, concluded that the acquisition would be "advantageous for the group to own the freehold (or long leasehold) interest in a significant number of the properties from which the group trades".
PIRC argued that it was "unclear" why the company would pay for its own strength of covenant "considering that it already leases most of the properties being sold".
The watchdog said that although the requested £86.8m pricetag on the properties matches the price Ashley paid, it was not clear whether if all of the properties had been put on the market, and so is difficult to ascertain a fair market value.
PIRC's report also points to "a lack of strategic consideration" which suggests the purchase is not part of a formal plan, as Sports Direct currently owns leasehold on just 16 of its 394 properties.
It concluded by saying that it recommended shareholders to oppose the move.
Under the conditions of a related party deal, the acquisition requires shareholder approval. Ashley will not vote on the resolution which will be proposed at the company's next general meeting tomorrow (7 September).
The proposed acquisition will be financed through the company's existing cash resources and banking facilities, said Sports Direct.
