* Sports Direct sells 4.6 pct stake days after buying it
* Agrees option deal that could give it 6.6 pct stake
By Paul Sandle
LONDON, Jan 16 Mike Ashley's Sports Direct has
sold the stake in Debenhams it bought just days ago, making a
profit of about 4.6 million pounds ($7.5 million), and replaced
it with a complex option that bets on the department store's
shares staying underpinned.
Sports Direct, Britain's largest sporting goods
retailer controlled by the billionaire who also owns Newcastle
United soccer club, said on Thursday it had agreed a so-called
"put" option that could see it buy a 6.6 percent stake in
Debenhams next year from an undisclosed counterparty.
Under the deal, Sports Direct is paid a fee for agreeing to
buy the shares at an pre-set price in the future.
If Debenhams shares rise above that undisclosed strike
price, Sports Direct will be able to profit from the difference
if the counterparty decides to sell, though it will be left with
only the original fee if the counterparty does not sell.
Conversely, if the share price falls, Sports Direct will
have to buy the stake at the agreed price, or pay the cash
difference between the share price and the strike price.
It said its maximum exposure - in the case of it having to
buy the shares after they had lost all of their market value -
was about 64 million pounds, taking into account the fee.
As Debenhams shares are trading close to 18 month lows
following a profit warning on Jan. 31, analysts said Ashley
appeared to be making a reasonable bet.
"The canny man has reduced direct exposure and freed up
capital, maintained indirect exposure and is even set to pocket
some cash in the meantime," said Mike van Dulken, head of
research at Accendo Markets.
Debenhams said the option expired in five tranches between
Jan. 14 and March 12, 2015.
Sports Direct did not disclose how much money it made from
selling the 4.63 percent stake in Debenhams which it announced
only on Monday. Based on the share price movement over the past
week, it may have made around 4.6 million pounds.
Despite no longer holding a direct stake in Debenhams,
Sports Direct reiterated its intention to be supportive.
"Sports Direct wishes to explore options at an operational
level to work together with Debenhams and is looking forward to
meeting with Debenhams' senior management team in the near
future," Sport Direct said.
Debenhams declined to comment. Its shares were trading down
1.9 percent at 81.6 pence at 1425 GMT.
N+1 Singer analyst Matthew McEachran thought Ashley hadn't
backed away from his view that Debenhams' shares were too cheap.
"With this option (Ashley) still believes he can force his
way into discussions with the management team," he added.
But he said Debenhams' management already had its work cut
out in finding a new finance director and reviving confidence
after over-cooking its promotions in the peak trading period
over Christmas. Unless Ashley brought obvious benefits, he could
be viewed as an unwelcome distraction, McEachran added.
Analysts had interpreted the initial stake purchase as an
indication Sports Direct would seek to establish concessions for
some of its fashion brands, including Firetrap, Kangol and
SoulCal, in some of Debenhams' 156 UK stores, using its position
as a shareholder as leverage in negotiations.