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Arcadia woes jeopardise JD Sports' acquisition of Debenhams

Lauretta Roberts
29 November 2020

JD Sports is reported to have cooled on the idea of acquiring Debenhams following news that Arcadia, which operates numerous concessions across the department store chain, is close to appointing administrators.

The listed sports retail group had entered exclusive talks with Debenhams's investors to buy the chain, having said to have been attracted by its valuable online business and some of the prime stores in its retail estate.

However news that Arcadia, which owns Topshop, Miss Selfridge, Burton, Evans and Wallis, could be placed into administration as early as this week, has led to JD potentially backing away, according to multiple press reports. It is believed that Arcadia concessions in Debenhams turn over around £100m a year.

The news that JD might back off raises the spectre of liquidation for Debenhams, with Hilco already having been on standby for a number of weeks to carry out the task should it become necessary.

According to The Telegraph, however, if JD does back away, it may re-open the door for Frasers Group's Mike Ashley to step back in and pick up the business that has been in his sights for some time.

Towards the end of last year and the beginning of this year, Ashley made multiple attempts to secure control of Debenhams, which was then still listed on the Stock Exchange. He initially made offers of loans and then offers to buy the business outright but was repeatedly rebuffed by the department store's investors, led by Silver Point Capital.

Eventually the investors placed Debenhams into administration buying it straight back out again having formed a consortium known as Celine. The move enraged Ashley, who held nearly 30% of its shares and saw his stake wiped out in the move.

Celine then placed Debenhams back into administration at the start of the first UK lockdown and has been searching for a buyer for a number of weeks. Ashley's Frasers Group had complained they had not been given sufficient access to information to enable it to make a bid in the region of £300m, which was said to be the asking price from Lazard, which is handling the process.

Frasers walked away from a potential deal, claimed it had been "frozen out" of the process and shortly afterwards JD Sports was named a surprise "serious contender" to buy Debenhams.

However news of Arcadia's woes appears to have shaken JD's confidence in the deal, which had already been met with a tepid response from its shareholders. Others previously reported to have been interested in parts of the Debenhams business include Marks & Spencer and Next, who had their eye on certain stores, while The Hut Group had placed a bit for its website.

Meanwhile Frasers Group is said to have drawn up plans to offer a £50m loan to Arcadia to keep the business afloat. Its finance chief Chris Wootton confirmed yesterday that the company was ready to make the offer saying: “We hope that Sir Philip Green and the Arcadia Group will contact us today to discuss how we can support them and help save as many jobs as possible.”

Others believed to be likely bidders for all or part of Arcadia include acquisistive online group Boohoo with Next, which recently struck a deal to operate Victoria's Secret's UK operations after that fell into administration. Boohoo has made public its desire to create a global online branded fashion business in the vein of Inditex and H&M Group and has already picked up the Oasis and Warehouse brands which collapsed during the first lockdown.

But recent developments raise the real possibility that Ashley could yet add both Arcadia and Debenhams to his burgeoning empire, which already includes House of Fraser, Flannels, Sports Direct, USC, Evans Cycles, Sofa.com, Game and Jack Wills.

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